Improve sales performance measurement to enhance sales performance management and increase sales results.
Dave Stein explains why performance measurement and in particular, benchmarking, is essential for sales performance management in this guest article:
When we ask chief sales officers and sales leaders how they measure sales performance, 60% of them tell us that they don't measure it at all.
Of the remaining 40%, a majority depend solely on a single trailing indicator, performance against quota. If these leaders do mention another metric, it is typically either the size (and trending) of their pipeline or, perhaps, the number of proposals that result in a win.
Based upon our knowledge and experience working with dysfunctional sales organizations, these two metrics are subject to wild fluctuations, even within the same company. When you consider a typical enterprise--say a manufacturing company--you'll find that most every department has a set of processes or procedures and metrics by which performance of that function is measured: finance (think GAAP), manufacturing (think ISO 9000 and/or Six Sigma), customer service (we have all filled out plenty of surveys), HR (employee retention, employee satisfaction, etc.), logistics (throughput, on-time delivery), quality control, IT (TCO: Total Cost of Ownership), and even marketing (direct marketing campaign conversion rates).
In most companies, the last bastion to institutionalize formal processes and comprehensive and accurate measurement is sales.
Why is that?
We believe the root cause of the sales function being last on line is related to the personalities, traits and established behavior patterns of typically right-brained sales team leaders.
Engineers, accountants and factory workers' jobs are driven by process. And the output of their work is carefully monitored, measured and adjusted along the way by typically left-brained management.
Not so for sales. Many sales leaders manage through the rear view mirror, aggregating uncalibrated individual pipelines from their reps, focusing in on a few critical deals, and hoping for the best.
What's the answer?
As an integral component of your sales methodology, monitor a handful of carefully selected metrics to measure ongoing productivity (not just activity) of every member of your sales team.
Here are just a few of the metrics our clients are using to gain transparency into what is really coming down the pipeline:
- Accuracy of reps' date forecasts for opportunities moving from one phase of the sales cycle to the next.
- Average opportunity attrition rate from one phase of the sales cycle to the next.
- Number of deals closed out of written proposals delivered. (Assuming that all steps leading to proposal creation have been successfully completed.)
By the way, all that you need to install and implement a performance measurement program at your company is in ESR's 2007 Guide to Measuring Sales Performance.
There is no question that the vigilant monitoring of leading and lagging sales performance indicators and making appropriate real time adjustments in process, compensation and behaviors is a critical component of stellar sales performance.
About the Author, Dave Stein
After a career as a sales consultant, trainer, and author, I'm now CEO of ES Research Group, Inc., which I founded in 2005.
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