Measuring Sales Performance

When we ask sales executives how they measure sales performance, 60% of them tell us that they don’t have a performance measurement system in place. Of the remaining 40%, a majority depend solely on a single lagging indicator:  performance against quota/budget. If other metrics are even mentioned, they are typically the size/trending of their pipeline, the number of sales calls per week, or the percentage of proposals they submit resulting in a win.

When you consider a typical enterprise, you’ll find that almost every department has a set of processes or procedures and metrics by which performance is measured: finance (GAAP), manufacturing (ISO 9000 and/or Six Sigma), customer service (customer satisfaction, such as Net Promoter), HR (employee retention, 360 degree surveys), logistics (throughput, on-time delivery), Information Technology (TCO: Total Cost of Ownership1), and even marketing (direct marketing campaign conversion rates, for example). In most companies, the last bastion to institutionalize formal processes and comprehensive and accurate measurement is sales. (Some sales training companies are leaders in the area of helping their clients measure sales performance.)

Why is Sales Last When It Comes to Measurement?

The root cause of the sales function being last in line is related to the personalities, traits, and established behavior patterns of many (often right-brained) sales executives who came up through the ranks of sales themselves. Back when they were salesreps, process and measurement was uncommon in sales. It was much less of a critical component for success than it is today. At that same time, the engineers, accountants, and factory workers in that same company were driven by process—the output of their work carefully monitored, measured, and adjusted along the way by (often left-brained) management.

Today those former sales reps, who are now sales leaders, are behind the curve when it comes to process and, especially, measurement. They didn’t “grow up” with it, and now they are too busy to embrace it. Instead, they are regularly involved with helping the bottom third of their team drive business while hoping to somehow make their numbers, depending on forecasts aggregated from uncalibrated individual pipelines from their reps.

What’s the answer?

As an integral component of your sales methodology, monitor five to eight carefully selected leading and lagging indicators to measure ongoing productivity—not activity—of every member of your sales team. Based upon those behavioral and performance indicators, you can make adjustments to your processes when necessary, redeploying resources, responding quickly to new competitive threats, and providing the field with the right messages, tools, strategies and tactics—before it’s too late.

Here are a few of the metrics companies employing performance measurement best-practices are using to gain transparency into what is really coming down the pipeline:

  • Accuracy of reps’ projected dates 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.
  • Adherence of individual sales people to new behaviors learned during training.

One you have your sales process in place, especially the steps, actions, tasks, qualification criteria, and the metrics (like the examples above), you can automate this with a strong Sales 2.0 Analytics solution.

The Bottom Line

Installing, then monitoring leading and lagging sales performance indicators and making appropriate real time adjustments in approach, process, and actions is a critical component of stellar sales performance. As Peter Drucker said, “You can’t improve what you don’t measure.”


Note 1: ESR’s Principal Analyst and Research Fellow, Al Case, became the founder, group vice president and general manager of Gartner’s TCO Software division.  From there, Case became head of Gartner’s IT benchmarking business and president of Gartner’s eMetrix business performance management business.

Comments

  1. says

    Hi Dave,

    Interesting post. Can you post a link to the research of the 60%/40% split you mention at the top?

    To me, sales is and always has been, the most measured group in any company… we’re measured by how much revenue we bring in. Revenue is obviously the ultimate “performance-based” standard. So while there could be value in additional measurements, it’s important that they don’t get in the way of the performance themselves.

    And in general, it’s very very hard to control for uneven territories, different product sets, different experience levels, different contact lists, and plain old luck from any performance assessment. So we have to be careful when applying any kind of standard metrics across a diverse sales team.

  2. says

    Thanks for the link. That’s incredible! Does that mean that 60% of those companies surveyed don’t track revenue by salesperson? They must track revenue… but they don’t look at which of their people brings the most in?!? Is there a particular set of industries that the participants are drawn from? If you are any good at sales, it must be extremely frustrating to work in one of those companies – no way to demonstrate the value you are bringing in.

    • Dave Stein says

      Matthew, you got me! I misquoted the first sentence from the report. It now reads, “Over 60% of ESR’s clients and vendor references have indicated that they do not have a sales performance measurement program in place.” I have edited the blog post to reflect the actual quote from ESR’s report. Thanks so much for calling that error to my attention.

  3. says

    Thanks for the link. That’s incredible! Does that mean that 60% of those companies surveyed don’t track revenue by salesperson? They must track revenue… but they don’t look at which of their people brings the most in?!? Is there a particular set of industries that the participants are drawn from? If you are any good at sales, it must be extremely frustrating to work in one of those companies – no way to demonstrate the value you are bringing in.

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