Thinking back to one of the great cult films of the 1980s…Caddyshack. There is 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 that he doesn’t keep score. Puzzled, Judge Smails says, “How do you measure yourself with other golfers?” Ty responds by saying, “By height.”
Obviously, height doesn’t tell you anything about a golfer’s performance which is what makes the dialogue humorous. Yet, there is nothing funny about a sales organization that is 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 that the group usually mentions for inclusion is revenue. Revenue is not a metric. It is a result. There is nothing that sales managers can do to address revenue. They can, however, work with a sales person on specific activity levels that lead to quota attainment. In essence, the statistical components of your sales metric management system create a success roadmap for your sales people. If they are achieving the metrics in the system, they will be blowing out their revenue targets.
There are four steps to identifying the metrics for your sales metric management system.
- Measurable. If the area of the business you want to affect cannot be measured statistically, then how will you know whether or not it is 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 needs 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 was not tracked anywhere, you would not be able to measure it. Thus, outbound calls would not be part of your sales metric management system as it is not measurable. Identify other data points that reflect performance that is measurable. If you find that many of the areas you want to measure are not measurable, you may need to address your CRM. It may need to be reconfigured or replaced altogether.
- Meaningful. Just because you can measure a data point, it doesn’t mean that 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 well or terribly a player is performing. Easily, a set of counterpoint data could 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…including myself. The key is to select the most critical activities that drive the sales person’s success and include those in your sales metric management system. For each metric, ask yourself what that data tells you relative to the sales person achieving their revenue goal. The meaningful ones go in your system while the others are cast aside.
- Goal-oriented. Statistics without goals tell you very little about performance. Each statistical component of your sales metric management system needs to have a corresponding goal. When performance discussions take place with the sales person, their performance versus goal achievement serves as the focus of the agenda. This is a significant change from the typical discussions that are focused on whether or not sales quota was attained.
When setting the goal-levels for your sales metric management system, there is an important consideration. Remembering back to report cards from school, students achieved a letter grade based on their performance. A few kids received an “A” which meant they had delivered stellar performance. However, average performance reflected a “C” on the report card. If your sales person achieved the goal for a particular metric, what does that mean? Was their performance exceptional? Or did they perform at the mere minimum acceptable level to keep their job?
If you set your goal levels so that they mean A-level performance, you should expect few of your sales people 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 between the “A” and “C” philosophies. The key is to select one, understand its meaning relative to performance, and handle achievement accordingly.
- Trainable. The final component is to identify the mentoring that can be provided to a sales person who is not achieving a defined metric in the system. Since the metrics that you are managing are critical to a sales person’s success (meaningful), deficiencies cannot be left unaddressed. When you identify each metric for the system, if a sales person 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 think that revenue is a metric, many think that if a sales person is failing to achieve their revenue quota that they cannot close. It’s possible that closing is the issue. However, if you have your sales metric management system in place, you may find that closing isn’t the issue at all. Perhaps, the sales person doesn’t have enough activity in their pipeline. Or, that they struggle to move prospects through the buying process. Or, any of countless other possible deficiencies. Managers who have their sales metric management 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 my sales metric management system worksheet, click here.
© 2009 by Lee B. Salz. Lee B. Salz is a leading sales management strategist specializing in helping companies build scalable, high-performance sales organizations through hiring the right salespeople, effectively onboarding them, and aligning their sales activities with business objectives through process, metrics and compensation. He is the Founder and CEO of Sales Architects, Business Expert Webinars and The Revenue Accelerator. Lee has authored several books including the award-winning book Soar Despite Your Dodo Sales Manager. He is a results-driven sales management consultant and a passionate, dynamic speaker. Lee can be reached at lsalz@SalesArchitects.net or +1 763-416-4321.