Note: This is the final installment in a four-part series on sales metrics and their value in managing a sales force. To read the previous installment, clickhere.
One of the biggest problems we see in many sales forces is a lack of direct linkages between corporate goals, sales strategies, and sales force behaviors. The three are frequently allowed to operate independently with the tacit (and often faulty) assumption they're all in alignment and working toward a common end. In fact, this absence of "organizational alignment" is a commonly cited as a top concern of senior executives.
We believe the key to aligning an organization from top to bottom is to align the metrics each level uses to measure success. Few would disagree with this somewhat obvious statement, but we have seen many companies struggle mightily to get it right.
Recent research we conducted into how leading companies measure and manage their sales forces gives us some fresh insights into how to tackle the challenge of organizational alignment through the use of an integrated set of metrics.
Metrics: Vehicle for Alignment
As we explained in preceding articles, a key finding of our study was that there are three distinct levels of metrics that can (and should) be used to measure and manage a sales force.
First, there are metrics of business results. These measures—such as revenue, profitability, market share, or customer satisfaction—are viewed at a company level and are used to report the overall health and success of the organization.
These metrics are not "manageable" per se, since no individual can directly control them. No matter how many times a CEO instructs a VP of sales to "make" their revenue number, the VP cannot turn around and command the number to change. There are numerous factors affecting overall business results, and many of the factors are out of the sales force's control.
Second, there are metrics of sales objectives. These are measures such as customer retention, new product sales, market coverage, opportunity win rates, or sales force turnover constituting the sales force's success at achieving specific goals.
These metrics are not directly manageable, either. You cannot, for instance, command a customer to buy from you. What these measures do provide, however, is guidance for what the sales force should hope to accomplish. They are (as named) the objectives any sales force pursues.
Finally, there are metrics of sales processes. These are measures of activity such as the volume of sales calls being made, number of customers assigned to each salesperson, percentage of salespeople using CRM tools, or the amount of training provided to the sales force.
These metrics are directly manageable, since a front-line sales manager is absolutely able to demand more calls, reassign customers, enforce tool usage, or increase training for their reps. In fact, this is why sales managers exist: to ensure their salespeople are doing the correct things correctly.
One of the most important insights gleaned from this research is that there are direct cause-and-effect relationships between the levels of metrics. That is to say, sales processes drive sales objectives, and sales objectives drive business results.
For instance, if your salespeople are instructed to make more calls (a sales process), they should be able to cover more of a given market (a sales objective). All other things being equal, greater market coverage should lead to greater market share (a business result).
There is a clear chain of events from one level to the next, and there must be linkages between the levels to ensure that the activities of the salespeople will ultimately lead to the achievement of overall results.
Annual Planning's Role
To ensure organizational alignment, this chain of events must be reverse engineered—a task best performed during your annual planning process. If your strategic goal for the year is to increase market share, you could set an objective for the sales force to increase its market coverage.
To achieve this objective, you could instruct your salespeople to boost the number of sales calls they make throughout the year. And of course, you could use the planning process to set explicit targets for market share, coverage, and sales calls in order to measure and manage progress toward the goals.
Our observation, however, is many annual planning exercises never get to this actionable level of detail. Walk into any sales department and ask someone at random what their sales objectives are for the year, and their response will most likely be, "Making my quota."
While this answer is in some ways unassailable (certainly, we want all salespeople to make their quotas), it is also highly problematic.
This response reveals the annual planning process probably never moved beyond the top layer of metrics—business results. This is not an uncommon scenario, of course: the corporate revenue target for the year is broken into progressively smaller chunks (first by country, then by region, then by district, etc.) until each individual salesperson has a revenue number stamped on their foreheads. Yet, assigning a revenue target to a salesperson is not sufficient to ensure they achieve it.
A more effective planning process does not end with the dissection of business results. It then moves on to identify the sales objectives leading to those desired results. For instance, if you intend to grow your revenues by 10 percent next year, you should identify how you will achieve that growth.
Your new sales objective could become to acquire 10 percent more customers next year. Or sell 10 percent more products to your existing customers. Or even raise your average purchase price by 10 percent. Whatever your plan of attack, you must put a deliberately conceived one in place.
Once you have identified the sales objectives you want to achieve, you then must determine what changes in your sales processes will lead to your realizing those objectives. For instance, if you decide your preferred objective for the year is to acquire 10 percent more customers, you might need to generate 10 percent more leads or hire 10 percent more salespeople.
Whatever your objectives, you need to make tactical changes in your selling activities, or else you are simply asking for results and hoping for the best.
Implications for Sales Leaders
Organizational alignment is possible, in fact assured, if everyone's performance metrics are thoughtfully integrated. You accomplish this by starting with your desired business results, then identifying the changes in your sales objectives and sales processes that will ensure those outcomes.
By designing a set of interrelated metrics, you can measure success at all levels of your organization and drive the specific behaviors leading to overall success.
This year, don't just assign a quota and assume it will happen. Instead, provide specific guidance on how to achieve it, then measure and manage progress along the path to success.
Jason Jordan is a principal of Go To Market Partners, a sales management consulting firm, and the director of research for the University Sales Education Foundation.