This post originally appeared here on the Sales Management Association blog.
This is the fourth and final installment in our series introducing research from our best-selling book Cracking the Sales Management Code. Previously we defined a framework for measuring and managing the sales force and revealed interconnections among the metrics identified. (See part 1, part 2 and part 3.) In our final installment, we explain how thoughtfully selecting performance metrics creates field level alignment with C-suite targets.
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 that they are all in alignment and working toward a common end. We believe that the key to aligning an organization from top to bottom is to align the metrics that each level uses to measure success. Our research gave us some fresh insights into how to tackle the challenge of organizational alignment through identification of an integrated set of metrics.
As we explained in parts one through three, 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 for 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’ the revenue number, the VP cannot turn around and command the number to change. There are numerous factors that affect overall Business Results, and many of the factors are out of the sales force’s control.
Second, there are metrics for Sales Objectives. These are measures such as customer retention, new product sales, market coverage, opportunity win rates, or sales force turnover that constitute the sales force’s success at achieving specific goals. These metrics are not directly ‘manageable’ either, since you cannot, for instance, command a customer to buy from you. However, these measures do provide guidance for what the sales force should hope to accomplish. They are the objectives that any sales force pursues.
Finally, there are metrics for Sales Activities. These are measures of activity such as the volume of sales calls being made, frequency of account planning, percentage of salespeople using CRM, or amount of training provided to the sales force. These metrics are directly manageable, since front-line sales managers are absolutely able to request more calls, ask for account plans, enforce tool usage, or increase training for their reps. In fact, this is why sales managers exist … to ensure that their salespeople are doing the correct things correctly.
One of the most important insights from this research is that there are direct cause-and-effect relationships between the levels of metrics. Sales Activities drive Sales Objectives, and Sales Objectives drive Business Results. For instance, if salespeople are instructed to make more calls (a Sales Activity), they should be able to cover more of a given territory (a Sales Objective). All other things being equal, greater territory 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.
To create organizational alignment, the chain of events must be reverse engineered – a task that is best performed during the business planning process. If the strategic goal for the year is to increase market share, then an objective can be set for the sales force to increase its territory coverage. To achieve this objective, salespeople can be instructed to boost the number of sales calls that they make throughout the year. The planning process can be used to set explicit targets for market share, territory coverage, and sales calls to measure and manage progress toward those goals.
However, our observation is that many business planning exercises never reach 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 “to make my quota.” While this answer is in some ways unassailable, it is also highly problematic.
The response reveals that the planning process probably never moved beyond the top layer of metrics â€“ Business Results. This is not an uncommon scenario, since the corporate revenue target for the year is typically broken into progressively smaller chunks (first by country, then by region, then by district, etc.) until all salespeople have revenue numbers 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 proceeds to identifying the Sales Objectives that will lead to those desired results. For instance, if the goal is to grow revenues by 10% next year, sales leaders must identify how that growth will be achieved. A Sales Objective might be to acquire 10% more customers next year, or to sell 10% more products to existing customers, or raise the average purchase price by 10%. There must be a deliberately conceived plan in place.
Once Sales Objectives have been identified, the next step is to determine what changes in Sales Activities will lead to their realization. For instance, if the objective for the year is to acquire 10% more customers, then reps need to generate 10% more leads, or there should be a 10% increase in sales rep hires. Whatever the objectives, each must be accompanied by tactical changes in selling activities to ensure success.
Organizational alignment is possible, in fact assured, if everyone’s performance metrics are thoughtfully integrated. Start with the desired Business Results and then identifying the changes in Sales Objectives and Sales Activities that will ensure those outcomes. By designing a set of interrelated metrics, success can be measured at all levels of an organization and drive the specific behaviors that will lead to overall success. Don’t just assign quotas and assume they will happen. Instead, provide specific guidance on how to achieve them, then measure and manage progress along the path to success. Only then will you have done your job as a proactive sales leader.