How to Understand Sales Performance Management | SalesAndMarketing.com
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How to Understand Sales Performance Management

Sales performance management (SPM) has taken the turn into mainstream business. Like ERP in the early 1990s and CRM in the late 1990s, SPM's day has come.

Like ERP in the early 1990s and CRM in the late 1990s, SPM's day has come. Just hiring more salespeople or trying to acquire one's way to growth is becoming increasingly more difficult. High-tech companies have it even harder than other industries as sell cycles are often more complex, longer and competitive.

The new-hire salesperson ramp to productivity can be long (from nine to 12 months). Wth turnover rates seemingly increasing (not mention salaries), this all contributes to the difficulty adding more salespeople has in growing revenue while managing profitability.
Companies in all industries have realized that they must keep focus on what they have. They must give more attention to who is driving revenue and model those behaviors to top-line and bottom-line growth. Using technology to enable SPM is the key to managing this process.

SFA and CRM brought considerable efficiency to the sales process in managing and tracking customer-related activities and contact management. Still, little attention has been given to how to make a salesperson more effective.

It is effectiveness that brings you more revenue. It is effectiveness that drives organic growth.

There is a dynamic that must first be considered when a company has come to the conclusion that it has to get more out of what it has. Salespeople have to be categorized to determine where they fall in the growth cycle. Salespeople should to be divided into five categories:

1. Top sellers or top 20 percent. While these are not necessarily your best representatives overall, they are the ones currently delivering.

2. Mid group. About 60 percent of your team will fall here. We are looking to separate those who are improving.

3. Inside the same group (the 60 percent) but those who are consistently lagging.

4. Your bottom group (or bottom 20 percent), which again is divided. These people consistently perform below expectations or quota.

5. Again the bottom group or bottom 20 percent but these are new hires (from six to 12 months with the company).

This is only the first step, however, because you are only using revenue to determine their category.

Representatives may be doing many of the right things but have not yet begun to get real traction. You have to look at leading indicators to revenue.

In understanding the leading indicators to revenue, you have to consider what the important elements are that make up the indicators that determine revenue. It is here where it can be tricky without the right technology.

When companies really begin to understand what the leading indicators are for their businesses and narrow them down to 15 or 20 and track, measure, monitor and manage to those indicators, it is then they can begin do drive more revenue out of every salesperson or make the hard decisions on people who are not performing.

Leading indicators are different for every company. Still, there are similarities by industry and types of products or services sold. Companies that have spent money on process or sales training often know what those indicators are. They just don't know that they know.

This is because they are only tracking revenue or profitability and not tracking the right things that lead to revenue. To make it simple, revenue is a result and profitability is a result that once done cannot be changed or altered. It is what it is. These are trailing indicators.

Pipeline accuracy or stability, forecasting accuracy, number of calls being made, type of deals in the pipeline and representative skill assessment are all examples of leading indicators that if tracked, monitored, measured and coached can change the outcome of revenue.

Companies are investing in reporting systems, dash-boarding tools, business intelligence tools or building super Excel reports to try to better leverage data from tools such as CRM, ERP or HR systems.

The problem with this approach is the leading indicators have typically not been clearly identified and sales managers become overwhelmed with reports or information. Companies that really want to make an impact on organic growth need to consider operational or functional applications.

Managing the true leading indicators to revenue will drive more revenue and the sales manager will know what to coach on to get more results.

Patrick Stakenas is president and CEO of ForceLogix. He can be e-mailed at pstakenas@forcelogix.com.