Cracking the Sales Management Code: The Secrets to Measuring and Managing Sales Performance

This is Part One of a Four Part Series that originally appeared here in the Sales Management Association blog.

We’re delighted to write a four-part blog series to introduce the research findings from our best-selling book, Cracking the Sales Management Code. Ground-breaking research and insights from the book have transformed sales management thinking within global companies like GE, 3M, Tyco, and many others. In the first blog, we highlight the often ignored truth that you can only get what you want tomorrow by focusing on what you do today.

An Ocean of Data

Over the past three decades, CRM has vastly improved the measurement and reporting capabilities of the sales function. Today, every sales force has some type of CRM tool which generates dozens of management reports. However, we observe that this increased access to data has not been accompanied by a corresponding increase in control over sales performance. Despite all the data at our fingertips, we still lack useful management insights.

Why is it that more sales data has not necessarily resulted in more effective sales management

Although drowning in numbers, executives lack a framework they can use to consistently pinpoint problems and proactively manage salespeople to higher performance. 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.

To understand the current state of affairs, we examined 306 key sales performance metrics provided by dozens of global sales forces in a survey conducted along with the Sales Education Foundation. The research was highly insightful, and it revealed a straight-forward framework that all executives can use to better manage their sales forces’ selling effort.

Can You Manage that Metric

On first examination of the 306 sales metrics, we observed that each sales force had organized its data in very different ways. Though there were many metrics in common across the companies such as percent of reps attaining quota, and dollars spent on training, there was little uniformity in the way the measurements were organized. Further, none of the methods was particularly useful for our purpose: To understand how executives can use key metrics to better manage their sales forces.

Frustrated by the lack of structure the survey had provided, we decided to put all 306 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:

How ‘manageable’ is this metric

That is, how much impact can a manager have on a 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 ratio. An example of an ‘unmanageable metric’ is revenue per rep. Although many have tried, no sales manager can simply command a salesperson to obtain more revenue, since here are many factors that affect a salesperson’s revenue production.

Using this one criterion as the basis for our undertaking, we soon discovered three distinct levels of ‘manageability’ into which all sales metrics fell.

Directly Manageable Metrics: Sales Activities

All directly ‘manageable’ metrics were related to salesperson or sales manager activities. These activities can be?managed through unilateral decisions of a sales manager.

For instance, sales managers can direct their salespeople to complete account plans for their major customers. Or they can select the types of training they provide to their reps, or the number of hours that they spend on coaching. These are the only sales force metrics that can be managed with any level of certainty and control, because they are the immediate results of actionable decisions by a salesperson or manager.

Examples of Sales Activity metrics:

• Percent of sales calls made
• Percent of account plans completed
• Number of hours coaching per rep
• Percent of reps using CRM

Sales Activity provide primary feedback about the ongoing performance of their salespeople. We believe these are the best leading indicators of sales performance – that the proper selling activities are being executed properly. In other words, if you are doing the right things today, success will surely follow tomorrow.

Indirectly Manageable Metrics: Sales Objectives

Unlike Sales Activities, most of the metrics we observed could not be directly managed. In fact, we found that the largest group of numbers was focused on measuring the achievement of specific selling goals or objectives. We therefore called these metrics Sales Objectives. These are not unilateral decisions that can be directed by a manager – they require some level of consent by customers or employees. These can be influenced only indirectly by managing the preceding activities that lead to success with the objectives desired.

For example, a sales manager cannot direct a customer to hand over a higher share-of-wallet (a Sales Objective), because the customer must agree to buy additional products from her sales force. But she can direct her salespeople to do better account planning (a Sales Activity) which should ultimately affect the share-of-wallet the company receives from its customers.

Sample Sales Objective metrics:

• Percent customer retention
• Percent deal win rate
• Number of newly acquired customers
• Percent new vs. existing products sold

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 activities to reach the new objectives. Sales Objectives serve as the goal posts toward which you point your sales force. They are achieved by doing the right preceding activities.

Unmanageable Metrics: Business Results

The final category of metrics we observed was called Business Results. These measurements include high-level outcomes that require entire enterprise-wide effort to achieve, such as revenue, profitability, or market share. Contrary to general belief, Business Results have no direct relationship to salesperson activities and disappointingly, cannot be managed. They can only be indirectly influenced by achieving certain intermediary Sales Objectives that will in turn lead to the desired Business Result.

For example, a sales manager cannot in any way directly affect revenue growth (a Business Result), because there are many preceding things that affect that ultimate outcome. But an increase in customer/new customer acquisition (a Sales Objective) should lead to an overall increase in revenue growth. Therefore, Business Results can only be achieved when precursor Sales Objectives have been reached by executing the proper Sales Activities.

Sample Business Result metrics:

• Percent revenue attainment
• Percent market share
• Dollar profitability
• Percent customer satisfaction

Business Result metrics have a high value in reporting. These enterprise-level measurements must be monitored with great attention, though their only active role in management is in measuring success and determining which Sales Objectives need to be pursued. We repeat: Revenue is a Business Result that cannot be managed.

The Lesson for Sales Leaders

We discovered that sales forces are obsessed with the things they want – not necessarily the things they actually do. The organizations in our study collected a mix of metrics across the three levels that looked like this:

• Business Results – 28%
• Sales Objectives – 55&
• Sales Activities – 17%

The lesson in this data is clear:

1. If you are like most sales leaders, you are focusing your attention on things that you cannot manage.
2. It is likely that the vast majority of your data points (83% in our study) cannot be affected through the direct actions of your sales force. To repeat, revenue is a business result that cannot be managed.
3. To exercise control over your desired sales performance outcomes, focus first on the Sales Activities that will drive you toward your desired Sales Objectives.
4. This interconnected system of meaningful performance metrics mimics those of finance and operations leaders, and should bring you the same level of control and manageability.

If your quest to manage Sales Activities goes well, then you will achieve success in the form of better revenue, profitability, and market share numbers. Spend your time worrying about the things your sales force is doing today. A bright tomorrow will follow.