By: Lee B. Salz – President of Sales Dodo
Thinking back to one of the great cult films of the 1980s…Caddyshack. There is a conversation between Ty Webb (Chevy Chase) and Judge Smails (Ted Knight) in the locker room after Ty has just finished a round of golf. Judge Smails asks Ty what he shot that day and Ty responds by telling the Judge that he doesn’t keep score. Puzzled, Judge Smails says, “How do you measure yourself with other golfers?” Ty responds by saying, “By height.”
Obviously, height doesn’t tell you anything about a golfer’s performance which is why that dialogue is humorous. Yet, there is nothing funny about a sales organization that is using meaningless, arbitrary data to assess the performance of their sales team. Even worse is if the only number tracked, measured, and monitored is revenue quota attainment.
When I conduct workshops on building a sales metric management system, the first metric that the group usually mentions for inclusion is revenue. Revenue is not a metric. It is a result. There is nothing that sales managers can do to address revenue. They can, however, work with a sales person on specific activity levels that lead to quota attainment. In essence, the statistical components of your sales metric management system create a success roadmap for your sales people. If they are achieving the metrics in the system, they will be blowing out their revenue targets.
There are four steps to identifying the metrics for inclusion in your sales metric management system.
For example, if you wanted to track the number of outbound calls made by your sales team, but that data was not tracked anywhere, you would not be able to measure it. Thus, outbound calls would not be part of your sales metric management system as it is not measurable. Search for other data points that reflect performance that is measurable. If you find that many of the areas you want to measure are not measurable, you may need to look at your CRM. It may need to be reconfigured or replaced altogether.
I recall my time as a sales management executive where on any given day I could put together a series of data that would support promoting or firing any member of the sales team including myself. The key is to select the most critical activities that drive the sales person’s success and include those in your sales metric management system. For each metric, ask yourself what that data tells you relative to the sales person achieving their revenue goal. The meaningful ones go in your system while the others are cast aside.
When setting the goal-levels for your sales metric management system, there is an important consideration. Thinking back to report cards from school, students achieved a letter grade based on their performance. A few kids received an “A” which meant they had delivered stellar performance. However, average performance reflected a “C” on the report card. If your sales person achieved the goal for a particular metric, what does that mean? Was their performance exceptional? Or did they perform at the mere minimum acceptable level to keep their job?
If you set your goal levels so that they mean A-level performance, you should expect few of your sales people to hit them. If you set them at the C-level, you are establishing the baseline for minimum acceptable performance. There isn’t a right or wrong approach between the “A” and “C” philosophies. The key is to select one, understand its meaning relative to performance, and handle achievement accordingly.
Just like many think that revenue is a metric, many think that if a sales person is failing to achieve their revenue quota that they cannot close. It’s possible that closing is the issue. However, if you have your sales metric management system in place, you may find that closing isn’t the issue at all. Perhaps, the sales person doesn’t have enough activity in their pipeline. Or, that they struggle to move prospects through the buying process. Or, any of countless other possible deficiencies. Managers who have their sales metric management system in place can quickly identify the problem area and address it.
Designing your sales metric management system well-positions you to create an effective sales compensation plan. Remember, your sales compensation plan tells your sales people where to invest their selling time. Thus, the compensation plan reinforces your sales metric management system. If you would like my sales metric management system worksheet, send me an email.
SalesforceXP Magazine. Look for Lee’s new book in 2010 titled, “The Sales Marriage” where he shares the secrets to hiring the right sales people. He is a results-driven sales management consultant and a passionate, dynamic speaker. Lee can be reached at lsalz@SalesArchitects.net or 763.416.4321.