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Cracking the Sales Management Code: The Secrets to Measuring and Managing Sales Performance

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Cracking the Sales Management Code: The Secrets to Measuring and Managing Sales Performance

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Highlights & Notes

So selection, one of the old “three Ss,” is still a vital component of success. But in the ever more complex business environment where companies must compete for the future, it’s even more important to select good sales managers than good salespeople.

“If you cannot measure it, if you cannot express it in quantitative terms, then your knowledge is of a meager and insubstantial kind.”

What you cannot measure, you cannot improve. Sales metrics are important because they allow us to measure, understand, control, and improve the performance of sales forces.

Basically, our ability to report data accelerated faster than our ability to understand it.

When the right artist gets the right canvas and the right subject to paint, magic can occur.

With extremely rare exception, the best sales managers we’ve encountered are unconsciously competent scientists. They hold formal meetings with formal agendas on formal schedules. They set rigorous expectations for their salespeople and track progress against those goals with equal rigor. They manage by analysis rather than anecdote and by measurement rather than gut. They are continuous-improvement experts with action plans galore. While their lower-performing peers try to manage with the same artistic flair that served them well as salespeople, high-performing managers adopt a more scientific approach to management that enables them to get consistently higher performance from their team.

Salespeople aren’t typically taught management skills, and superstar sellers are legendary for avoiding structure and formality. Yet these are the same people who routinely get promoted into management. Managers do need structure.

Our criterion for managing became that a frontline sales manager could directly influence the metric by asking someone to do something differently.

Number of Sales Calls Made per Rep Percentage of Reps Using CRM Percentage of Account Plans Completed Number of Accounts Assigned per Rep Number of Reps Assigned per Manager Dollars Spent on Rep Training

Sales Activity metrics are used to quantify and track the day-to-day “doings” of the sales force. What are the sales reps doing? How are they doing it? What is the sales manager doing to enable and support them? Making phone calls, completing strategic account plans, visiting prospects, attending training events, writing proposals, coaching reps, meeting with customers—the list of potential doings goes on and on.

Activities can be managed—outcomes can’t.

To sum it up, the Sales Activity metrics are where all the action is.

Business Result metrics include:   Revenue Growth Percentage Share of Market Gross Profit Customer Satisfaction Rating

have control over something, it is fundamental that we understand the cause-and-effect relationship between the action we take and the outcome we expect.

The insight is that if you want certain outcomes, you have to do specific things.

Asking for specific Sales Objectives without ensuring that the proper Sales Activities are in place is not necessarily a recipe for inevitable disaster, but it is certainly a recipe for unpredictable and (more importantly) uncontrollable performance.

It cracks when everyone in the field understands what they must do at the Sales Activity level to achieve specific Sales Objectives and the consequent Business Results.

  1. Sales Activities, which are highly manageable and whose associated metrics can be moved at will 2. Sales Objectives, which can be directly influenced and whose associated metrics can be driven by managing certain Sales Activities 3. Business Results, which are wholly unmanageable but whose associated metrics are determined by the achievement of specific Sales Objectives

Sales Activities drive Sales Objectives, which in turn drive Business Results.

In sum, we identified categories of performance metrics that examine a company’s health from several perspectives:   Do we think our company is healthy? Do others think it is healthy? Is it healthy compared to its peers?

leadership itself is responsible for setting healthy expectations for its organization and the organization’s stakeholders.

It became quickly apparent that sales pipeline metrics have two distinct uses. The first intended use is to measure the health of the company looking into the future.

The second use of sales pipeline metrics is to measure the effectiveness of salespeople at moving opportunities through their sales cycles.

By identifying where a seller’s deals are getting stuck in the sales cycle, a manager can provide guidance or support to help the salesperson move further down the path to success.

So our breakthrough with the sales pipeline metrics was to separate the “forecasting” measures from the “salesperson effectiveness” measures. The forecasting metrics went into the Financial bucket within Business Results, and the effectiveness metrics went into a to-be-determined bucket within Sales Objectives.

Customer Satisfaction metrics constitute most of the Satisfaction numbers we saw, and they were quantified through measures like these:   Overall Customer Satisfaction Ease-of-Doing-Business Index Percentage of Customers with Intent to Refer Leadership also cares greatly about the perceptions of its employees, and our research reflects this fact. In our data were employee-facing measurements like:   Employee Satisfaction Index Employee Intent to Stay Employee Engagement Index

As a rule, the more specific a Satisfaction measure gets, the more practical it becomes as a management tool.

There is a “Curse of Intimacy” that sometimes settles on a sales force that enjoys long-term relationships with its customers. After years of repeated interactions, salespeople can become numb to subtle signals from their customers that would be completely apparent to a bystander. Further, intimacy can breed the false assumption that customers will openly reveal all of their concerns to their salesperson. Sellers will often say, “I don’t need to constantly ask that customer how we’re doing. I’ve known him for 20 years, and I talk to him every week. If he has a problem with us, he’ll let me know.” Maybe.

From this perspective, satisfaction surveys are intuitively appealing. They give customers, or in some cases employees, the opportunity to provide candid feedback in a sterile, non-threatening environment. Surveys are also relatively low-cost, so they enable data collection on a scale that is useful for analysis. They therefore can be a safe and productive path around the Curse of Intimacy. But there is one big pothole on that path that counterbalances our love-hate quotient. A little data is a dangerous thing. Though one might tend to believe that any data is good data, gathering insufficient or inaccurate data is far worse than gathering no data at all. A theme of this book is that when good metrics are used properly, they provide managers with the insights to make good decisions and the ability to drive change. Conversely, inadequate or misinterpreted data can cause the wrong decisions to be made, which can have a devastating effect when the wrong kind of change is implemented.

Management stops begging for outcomes and starts directing the behaviors that will cause a chain reaction from Activities to Objectives to Results.

We had now begun to dig into the management code by examining the level of metrics that cannot be managed whatsoever, Business Results. Eventually, these metrics all fell into one of three categories:   1. Financial, which are primary accounting measures like Revenue and Profit (note that these can be reported as either forecasted or realized dollars) 2. Satisfaction, which are measures of customer and employee pleasure with certain aspects of a company, its products and services, or its relationships (aka the applause-o-meter) 3. Market Share, which are measures of a company’s captured portion of its total addressable market

Of course, as high-level corporate outcomes, Business Results cannot be directly managed. To exert any form of control over these numbers, leadership needs to select the right Sales Objectives and manage the right Sales Activities to drive its desired outcomes.

Hiring the right salespeople, deploying them in the right way, targeting the right customers, and selling the right products is the only formula for long-term organizational health.

Without cogent Sales Objectives, the sales force does the best it can. With cogent Sales Objectives, the sales force does what it should.

Our school of thought says to tell them the results you expect, tell them the objectives that will get them there, and then trust them to execute.

“There is the finish line, and here is the shortest route to get there.”

As we discussed, Business Results are the outcomes of an entire organization’s collective efforts. If a company has enough happy customers to meet its financial expectations, life is good for everyone. No single corporate function can take credit for the health of the entity, but every part of the business must contribute. That is, each part of the organization has objectives that it must achieve in order for the company to attain its high-level Business Results. For example, manufacturing’s objectives might include producing enough products to satisfy customer demand. Marketing might be accountable for developing new products that are relevant for its target markets. Finance might be tasked with maintaining sufficient selling capacity to pursue all desired opportunities maintaining sufficient capital to operate the business. Across the company, every department has critical business objectives that are specific to its functional domain.

Do I have enough salespeople in the right places? Are they capable sellers? Are they targeting the right customers? Are they selling the right products?

It is worth restating that Sales Objectives cannot be directly managed; they must be influenced by directing Sales Activities. For instance, you cannot immediately have more salespeople, but you can begin recruiting additional head count. You cannot command your salespeople to have more skill, but you can send them to training.

We called this category Market Coverage, and it includes these numbers:   Percentage of Market Opportunity Covered Percentage of Target Prospects Contacted Percentage of Productive Time for Reps Percentage of Vacant Positions

In essence, these metrics all point to one vital question for sales management: does your company have enough salespeople engaging the right customers to accomplish its go-to-market strategy?

The objective of the Market Coverage sales metrics is to help make staffing and time allocation adjustments that will keep your sales force operating at peak productivity.

In fact, we’ve seen data suggesting that most sales forces are understaffed to execute their go-to-market strategies.

Sales Force Capability metrics include numbers like these:   Deal Win/Loss Ratio Percentage of Deals Advancing by Stage Length of the Sales Cycle Salesperson Competency Index

So what, then, would you consider to be an excellent Deal Win Rate? Should your sales force win 75% of the deals it pursues? Or 50%? Or 35%? Who knows? These numbers are only relative to your own sales force’s past performance. Your threshold for “good” must come from within.

As Griffin’s ace VP of sales pointed out, having the right people in the right place is only the first of many challenges for crafty sales leaders. Next, they have to make certain that their salespeople are prepared to do the right things. And that is the role of Sales Force Capability metrics—to make sure that your sellers are capable of doing the right things. Generating leads, advancing opportunities, and closing deals are at the heart of a salesperson’s role. You need to know that your salespeople can execute such activities effectively.

Since not all customers are equally desirable, sales management must be directive about where its salespeople are investing their time.

The Customer Focus category includes these customer-centric metrics:   Revenue from New Customers Revenue Growth from Key Accounts Customer Retention Rates Revenue per Customer Segment Share of Wallet

We have seen Customer Focus objectives drive dramatic improvement in sales performance by shepherding misguided salespeople off the path of least resistance and into a target-rich environment.

As Avery highlighted, getting salespeople to focus on the right customers can be a challenge. Further, different Customer Focus objectives require different types of execution in the field. Acquiring new customers does not involve the same tasks as growing existing accounts. And targeting an unfamiliar customer segment can demand even more uncomfortable behaviors. Setting the proper Sales Objectives is always crucial, particularly when you’re providing your sales force with Customer Focus objectives. Put salespeople in front of the wrong customers to do the wrong stuff, and bad things will happen by design.

Measures of Product Focus include numbers like these:   Revenue by Product Percentage of Revenue from Target Products Number of Unique Products Sold per Rep Cross-Sell Rate

First, you need to ensure that you have enough selling effort to sufficiently cover your target markets. Second, you must develop a sales force capable of effectively selling your products and service. Third, you need to focus them on the right types of customers. And finally, you must provide them with guidance on what types of products to sell.

  • @gabrielhdm

If a sales force is the right size to execute its go-to-market strategy, is consistently increasing its selling capability, is capturing the right customers, and is selling the right products, then you have to say that it’s a good sales force. What more could you ask? If the Business Results aren’t coming, then either expectations were set too high, or there is something else working against the sales force. It’s still a good sales force because it’s achieving all of its Sales Objectives.

This is why Sales Objectives are so vitally important. They give management a deeper level of control over the performance of its sales force: “Don’t just bring us revenue—bring us the right revenue in the right way.

  1. Market Coverage, which measures whether the sales force has enough selling capacity to pursue all of its desired opportunities in the marketplace 2. Sales Force Capability, which reveals whether the salespeople and managers are skilled and enabled to effectively execute their Sales Activities 3. Customer Focus, which indicates whether the sales force is successfully capturing the company’s desired types of customers 4. Product Focus, which informs whether the sales force is successfully selling the company’s preferred products and services

If the sales manager is the most critical link in the chain of command from the war room to the battle-field, then Sales Objectives are the marching orders.

Therefore, the closest you can get to managing your sales pipeline is to manage your salespeople’s opportunities and calls.

In short, Opportunity Management and Call Management are pipeline management, and the only way to proactively improve your pipeline is to formalize these two processes and track their associated metrics.

The first activity in a good Account Management process is to assess your customer’s business needs.

Research shows that customers highly value suppliers that have an innovative eye and proactively bring new ideas to their customers.3 This can only happen if you invest the time to assess your customer’s business deeply.

If Account Management is important to your organization, then do it. If not, then do not. But don’t find yourself in the middle ground of investing moderate effort with zero return.

Why ever would you involve a customer in your account planning activities? Because that’s the only way to gain strategic alignment between the two organizations and maximize the mutual benefit of the relationship.

You can only align your sales force’s efforts with your customers’ objectives if you collaborate during account planning activities.

Stated in more tactical terms, Call, Opportunity, and Account Management processes help your salespeople improve what they do when they are face-to-face with a customer. Territory Management helps sellers get face-to-face with as many qualified customers as possible given their time and resource constraints.

Even in organizations with dedicated customer support roles, the salesperson is still the primary firefighter in the mind of the customer. And there is always a fire smoldering somewhere.

To be practical, some level of customer service is inherent in many selling roles. However, it should be meted out in the bare-minimum quantity and only to high-priority issues. If every customer can send its sales rep in search of a corrected invoice, then sales force call patterns don’t need to be directed toward external customers—they need to be directed at finance, operations, and every other internal corporate function.

As with any sales process, discipline is required to reap big rewards.

Whereas training is designed to instill common knowledge across a sales force, coaching is used to build a salesperson’s abilities based on her unique development needs.

don’t prescribe a remedy without first examining the patient—particularly when the remedy is an invasive procedure.

  1. Ad hoc process: The company lacks a single standard process, and each rep sells as he thinks best. 2. Informal process: The company gives its salespeople a sales process and expects them to follow it, but usage is neither monitored nor measured. 3. Formal process: The company enforces the use of a defined sales process and periodically reviews the process to ensure its effectiveness. 4. Dynamic process: The company monitors and provides continuous feedback on sales reps’ usage of the process and proactively modifies the process when market conditions change.

Companies with more developed sales processes enjoy greater sales performance.

  1. Call Management, which improves the effectiveness of individual customer interactions 2. Opportunity Management, which helps sellers navigate complex, multi-call sales cycles 3. Account Management, which maximizes the long-term value of a single customer 4. Territory Management, which allocates selling effort efficiently across numerous types of customers 5. Sales Force Enablement, which improves a sales force’s ability to execute

The specific sales processes you need in your sales force are determined by the nature of each individual selling role.

Which distinct selling roles are at work in our sales force? Answering this question will allow you to identify the nature of each selling role and to pinpoint the activities that drive success in each.

an Opportunity Management process is relevant if: The sales role pursues complex, multistage deals.

An Account Management process is used to maximize the long-term value of selected customers. It helps you to align your company’s goals with those of your customer and to find compelling ways to strengthen your business relationship.

By definition, Account Management activities are focused on customers with ongoing relationships that lead to repeated purchases over time.

Account Management process is relevant if: The seller pursues multiple opportunities over time with the same customer.

Territory Management process is only relevant if: The sales role makes proactive outbound sales calls.

Territory Management activities are most relevant if: The seller is assigned too many customers to fully engage them all.

Territory Management is particularly valuable if: You want to treat different types of customers differently.

W. Edwards Deming is credited with saying that “A bad system will beat a good person every time,”

In the absence of formal sales processes, management’s task is reduced to asking for desired Objectives and Results without the means to influence them. With sales processes, managers actually have something to manage.

If a process is too rigorous for the day-to-day activities of your salespeople, then it will be ignored and eventually abandoned. If it’s too little process, then its overall impact will be limited.

you can control your Sales Activity metrics by managing your sales processes.

The challenge is to find the easiest way to achieve your Result by choosing the Objectives that have greatest odds for success.

Letting go of the past is as much a part of management as providing guidance for the future.

Don’t fear manual reporting. Good reports are good to have, regardless of whether they come by pressing a “Run Report” button.

To achieve certain Sales Objectives, you have to manage certain sales processes.

If you want to proactively Manage Your Sales Force toward your ultimate goals, then you have a reasonably straightforward series of tasks to execute:   1. Carefully define the Business Results you want. 2. Identify (through thoughtful analysis) the Sales Objectives that will most easily lead you to those Results. 3. Select a process or processes that can directly influence your Objectives. 4. Choose specific Activities within those processes that you can manage on a day-to-day basis. 5. Make certain that you have quantified targets for all of your chosen Results, Objectives, and Activities. 6. Manage.

Plan from the top to the bottom, and then manage from the bottom to the top.

Trying to achieve a Sales Objective by managing the wrong process will be a frustrating waste of effort.

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