Sales Management Best Practices: The Metrics that Matter

Over the past decade or more, information systems have vastly improved the measurement and reporting capabilities within the sales function. But this increased access to data has not been accompanied by a corresponding increase in control over sales performance. Why is it more sales data has not necessarily resulted in better sales management?<br clear="none" /> <br clear="none" /> Our take on this problem: Much of the data being collected today is not very useful in actually managing salespeople. Despite being awash in numbers, executives lack a framework they can use to consistently pinpoint problems and proactively manage change. If sales leaders had an interconnected system of meaningful performance metrics like their finance or operations peers, they could enjoy the same level of control and manageability as these other business functions.<br clear="none" /> <br clear="none" /> To understand the current state of affairs, we examined a collection of 174 sales metrics provided by 17 different organizations in a 2008 survey by the University Sales Education Foundation. This research into the metrics leading companies use to manage their sales forces was highly insightful; it revealed a straightforward framework all executives can use to better manage their selling efforts. <br clear="none" /> <br clear="none" /> <b>17 Sets of Chaos</b><br clear="none" /> <br clear="none" /> Upon examining the aforementioned metrics, we discovered each sales force had categorized theirs in very different ways. While there were many metrics in common across the companies (percentage of reps attaining quota, percentage of product cross-selling, percentage spent on training, etc.), there was little commonality in the way the measurements were organized. <br clear="none" /> <br clear="none" /> For instance, one company had divided their metrics into internal and external measurements, but they had two metrics that were in both columns. Another had organized their metrics into buckets of revenue, cost, and salesperson measures, though the salesperson metrics included both revenue and cost per sales rep. In the end, the metrics were organized (or not) in as many different ways as there were respondents, yet none of the methods was particularly useful for our purpose: to understand how executives can use key metrics to manage their sales forces. <br clear="none" /> <br clear="none" /> <b>Can You Actually Manage that Metric?</b><br clear="none" /> <br clear="none" /> Frustrated by the lack of structure the survey had provided, we decided to put all 174 metrics into a pile and attempt to organize them ourselves. After experimenting with several criteria to establish our new groupings, we ultimately decided on a single question to serve as our guideline: <br clear="none" /> <br clear="none" /> How "manageable" is each metric?<br clear="none" /> <br clear="none" /> Said another way, how much influence does a sales manager have to directly affect the specific metric? An example of a manageable metric is the number of accounts per rep. This metric is highly manageable, since a sales manager can easily reassign their sales reps' accounts to increase or decrease the number. <br clear="none" /> <br clear="none" /> An example of an unmanageable metric is revenue per rep. No sales manager can simply command a salesperson to have more revenue (though many have tried). There are many factors affecting a salesperson's revenue number, so it therefore follows this cannot be directly managed by a sales leader.<br clear="none" /> <br clear="none" /> Using this one criterion as the basis for our undertaking, we soon discovered three distinct levels of "manageability" into which nearly all of the metrics fell.<br clear="none" /> <br clear="none" /> <b>Highly manageable metrics: sales processes.</b> All of the metrics deemed directly manageable were related to salesperson or sales manager activities. These activities (and the larger processes to which they belong) can be managed through unilateral decisions of a sales manager. <br clear="none" /> <br clear="none" /> For example, sales managers can direct their salespeople to complete account plans for their major customers. Or they can select the types of training that they provide to their reps. These types of decisions provide the only sales force metrics that can truly be managed with any level of certainty and control, because they are the immediate results of actionable decisions by a salesperson or manager.<br clear="none" /> <br clear="none" /> Sample sales process metrics: <br clear="none" /> <br clear="none" /> &#x2022; Number of calls.<br clear="none" /> <br clear="none" /> &#x2022; Percentage of account plans completed.<br clear="none" /> <br clear="none" /> &#x2022; Hours of training per rep.<br clear="none" /> <br clear="none" /> &#x2022; Hours of coaching per rep.<br clear="none" /> <br clear="none" /> &#x2022; Percentage of reps using CRM.<br clear="none" /> <br clear="none" /> Sales process metrics have a very high value in managing a sales force. For frontline sales managers, these should be the primary pieces of feedback about the ongoing performance of their salespeople. In fact, we believe these are the best leading indicators of sales performance&#x2014;that the proper selling activities are being executed properly. <br clear="none" /> <br clear="none" /> <b>Indirectly manageable metrics: sales objectives.</b> Many of the metrics we observed were measures of success in achieving specific selling goals or objectives. These are not unilateral decisions that can be directed by a manager&#x2014;they require some level of agreement by customers or employees. These can be influenced only indirectly by managing the preceding activities that lead to success with the stated sales objectives. <br clear="none" /> <br clear="none" /> For example, a sales manager cannot direct a customer to hand over a higher share-of-wallet (a sales objective), but they can direct their salespeople to increase their account planning activities (a sales process), which should ultimately affect the share-of-wallet they receive from their customers.<br clear="none" /> <br clear="none" /> Another example of a sales objective would be to increase new customer acquisitions. A sales manager cannot command a prospect to become a customer, but they can increase the volume of prospecting calls their salespeople make&#x2014;a Sales Process activity that should lead to winning more new customers.<br clear="none" /> <br clear="none" /> Sample sales objective metrics: <br clear="none" /> <br clear="none" /> &#x2022; Percentage of customer retention.<br clear="none" /> <br clear="none" /> &#x2022; Percentage of sales calls advancing.<br clear="none" /> <br clear="none" /> &#x2022; Salesperson skill level.<br clear="none" /> <br clear="none" /> &#x2022; Number of newly acquired customers.<br clear="none" /> <br clear="none" /> &#x2022; Percentage of new versus existing products sold.<br clear="none" /> <br clear="none" /> Sales Objective metrics have a high value in diagnosing problems and planning future activities. They help you to measure what you've achieved, determine what you want to accomplish, and decide how you need to change your processes to make the new objectives happen.<br clear="none" /> <br clear="none" /> <b>Unmanageable metrics: business results.</b> The final category of metrics we observed, business results, included very high-level outcomes&#x2014;often at the enterprise level. Business results have no direct relationship to salesperson activities or processes and cannot be managed. They can only be influenced by achieving certain intermediary sales objectives that would lead to the desired business result. <br clear="none" /> <br clear="none" /> For example, a sales manager cannot in any way directly affect market share (a business result), but an increase in customer share-of-wallet (a sales objective) should lead to an overall increase in market share. <br clear="none" /> <br clear="none" /> Sample business result metrics: <br clear="none" /> <br clear="none" /> &#x2022; Revenue Attainment.<br clear="none" /> <br clear="none" /> &#x2022; Market share.<br clear="none" /> <br clear="none" /> &#x2022; Profitability.<br clear="none" /> <br clear="none" /> &#x2022; Customer satisfaction.<br clear="none" /> <br clear="none" /> Business Result metrics have a high value in reporting. These enterprise-level measurements must be monitored (and they are) with great attention, though their only active role in management is in measuring success and determining which sales objectives need to be changed.<br clear="none" /> <br clear="none" /> <b>Implications for Sales Leaders</b><br clear="none" /> <br clear="none" /> The organizations in our study collected a fairly balanced mix of metrics across the three levels:<br clear="none" /> <br clear="none" /> Business results: 38 percent.<br clear="none" /> <br clear="none" /> Sales objectives: 36 percent.<br clear="none" /> <br clear="none" /> Sales processes: 25 percent.<br clear="none" /> <br clear="none" /> The implication for sales leaders is that collecting metrics at only one level (e.g., revenue) is leaving to chance the objectives their sales forces are pursuing and the processes they are using to get there. Processes, objectives, and results must all be measured and reported, if sales executives want to truly exercise control over their sales forces and manage their salespeople toward desired results. <br clear="none" /> <br clear="none" /> In the next installment of this series, we will reveal the six distinct sales processes uncovered by our research, along with the metrics critical for managing each.<br clear="none" /> <br clear="none" /> <br clear="none" /> <i>Jason Jordan is a principal of <a href="" target="blank">Go To Market Partners</a>, a sales management consulting firm, and the director of research for the <a href="" target="blank">University Sales Education Foundation</a>.</i>