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Sales Performance Measurement

When we ask sales executives how they measure sales performance, 60% of them tell us that they don’t measure it at all.  Of the remaining 40%, a majority depend solely on a single trailing indicator-performance against quota.  If other metrics are even mentioned, they are typically the size/trending of their pipeline or the number of proposals they submit resulting in a win. 

When you consider a typical enterprise, you’ll find that almost every department has a set of processes or procedures and metrics by which performance is measured:  finance (GAAP), manufacturing (ISO 9000 and/or Six Sigma), customer service (customer satisfaction surveys), HR (employee retention, 360 degree surveys), logistics (throughput, on-time delivery), IT (TCO: Total Cost of Ownership), and even marketing (direct marketing campaign conversion rates, for example).  In most companies, the last bastion to institutionalize formal processes and comprehensive and accurate measurement is sales.  (Some sales training companies are leaders in the area of helping their clients measure sales performance.)

Why is Sales Last When It Comes to Measurement and Process?

The root cause of the sales function being last in line is related to the personalities, traits and established behavior patterns of many typically right-brained sales executives who came up through the ranks of sales themselves. Back when they were salesreps, process and measurement was uncommon in sales. It was much less of a critical component for success than it is today.  At that same time, the engineers, accountants and factory workers in that same company were driven by process-the output of their work carefully monitored, measured and adjusted along the way by typically left-brained management.

Today those former sales reps, who are now sales leaders, are behind the curve when it comes to process and especially measurement.  They didn’t “grow up” with it, and now they are too busy to embrace it. Instead, they are regularly involved with helping the bottom third of their team drive business while hoping to somehow make their numbers, depending on forecasts aggregated from uncalibrated individual pipelines from their reps.

What’s the answer? 

As an integral component of your sales methodology, monitor five to eight carefully selected leading and lagging indicators to measure ongoing productivity-not activity-of every member of your sales team.  Based upon those behavioral and performance indicators, you can make adjustments to your processes when necessary, redeploying resources, responding quickly to new competitive threats and providing the field with the right messages, tools, strategies and tactics before its too late. 

Here are two of the metrics companies employing performance measurement best-practices are using to gain transparency into what is really coming down the pipeline:

  • Accuracy of reps’ date forecasts for opportunities moving from one phase of the sales cycle to the next. 
  • Average opportunity attrition rate from one phase of the sales cycle to the next. 

The Bottom Line

Installing, then monitoring leading and lagging sales performance indicators and making appropriate real time adjustments in approach, process and behaviors is a critical component of stellar sales performance.  As Peter Drucker said, “You can’t improve what you don’t measure.”

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2 Responses

  1. Very well stated Dave. I find the same issues with far too many companies. In addition those same companies are not providing enough direction to field managers on how to interpet KPI’s and then hold a coaching session that will focus on the skills that are negatively affecting the metric.

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