Every sales manager is searching for revenue from their sales force, but the recipe to achieving the revenue target comes from the development of a unique sales metric management system. To illustrate why, think back to one of the classic comedy films of the 1980s: "Caddyshack."
There's 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 he doesn't keep score.
"How do you measure yourself with other golfers?" a puzzled Smails asks.
"By height," Ty replies.
Obviously, height doesn't tell you anything about a golfer's performance, which is why that particular exchange is so humorous. But there's nothing funny about a sales organization 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 usually brought up by the group is revenue. Revenue is not a metric; it's a result. And there's nothing sales managers can do to address revenue.
They can, however, work with a salesperson on specific activity levels leading to quota attainment. In essence, the statistical components of your sales metric management system create a success roadmap for your salespeople. If they are achieving the metrics in the system, they will be blowing out their revenue targets.
When evaluating the metrics to be included your system, there are four questions that need to be asked:
1. Are they measurable? If the area of the business you want to measure cannot be measured statistically, how will you know whether or not it's working? This seems like circular logic, but I often hear about "trusting your gut" as a measurable statistic. Needless to say, gut instinct does not belong in a sales metric management system. There has to be a way to track the data easily and efficiently.
For example, if you wanted to track the number of outbound calls made by your sales team, but that data wasn't tracked anywhere, you wouldn't be able to measure it. Thus, outbound calls would not be part of your sales metric management system as they aren't measurable.
Search for other data points reflecting measurable performance. If you find 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.
2. Are they meaningful? Just because you can measure a data point doesn't mean it belongs in your sales metric management system. Like sports, there is no end to the data that can be measured in a sales organization. Sportscasters commonly use a series of statistics to present how great or terrible a player is performing. A set of counterpoint data could easily be presented showing the opposite point of view.
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 (myself included). The key is to select the most critical activities driving the salesperson's success and including those in your system. For each metric, ask yourself what that data tells you relative to the salesperson achieving their revenue goal. The meaningful ones go in your system while the others are cast aside.
3. Are they goal-oriented? Statistics without goals tell you very little about performance. Each statistical component of your sales metric management system needs to have a goal assigned to it. When performance discussions take place with the salesperson, their performance versus goal achievement serves as the centerpoint of the agenda. This is a significant change from the typical discussions focusing on whether or not sales quota was attained.
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. If your salesperson achieved the goal for a particular metric, what does that mean? Was their performance exceptional (an "A")? Or did they perform at the mere minimum acceptable level to keep their job (a "C"?
If you set your goal levels so that they mean A-level performance, you should expect few of your salespeople 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 here—the key is to select one, understand its meaning relative to performance, and handle achievement accordingly.
4. Are they trainable? The final component is to identify the mentoring that can be provided to a salesperson who is not achieving a defined metric in the system. Since the metrics you're managing are critical to a salesperson's success (meaningful), deficiencies cannot be left unaddressed. When you identify each metric for the system, if a salesperson is not achieving it, what potential weaknesses does it expose in their arsenal? As a sales manager, you can then begin digging to determine the root cause and help the sales person improve.
Just like many erroneously consider revenue to be a metric, many think a salesperson who fails to achieve his revenue quota cannot close. It is indeed possible closing is the issue, but if you have your sales metric management system in place, you may find that's not the issue at all.
Perhaps the salesperson doesn't have enough activity in his pipeline. Or he struggles to move prospects through the buying process. Or any number of other deficiencies. Managers who have their 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 to obtain my own sales metric management system worksheet, send an e-mail to the address below.
SMM editorial advisory board member Lee B. Salz is a sales management strategist, president of Sales Architects, CEO of Business Expert Webinars, and author of both "Soar Despite Your Dodo Sales Manager" and the forthcoming "The Sales Marriage." He can be reached at lsalz@SalesArchitects.net or by calling 763-416-4321.