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Five Sales Performance Metrics Key to Successful Business Growth

Five Sales Performance Metrics Key to Successful Business Growth

Every metric has a story to tell. Dig in over a period of time, break apart all that goes into the metric calculation, join the dots and there you have your story. But then you also have to ACT – your success depends on what you do after you figure out the story. What do you need to do more of? What do you need to eliminate? With the budget season in progress, sales performance metrics are on my mind again. In this Accenture analysis of Sales Performance Optimization Study, sponsored with CSO Insights, sales leaders say their top priorities for the past year was increasing sales effectiveness (56 percent), followed by increasing revenues (52 percent) and improving up-selling/cross-selling (39 percent). The Operations team can play a big role in increasing sales effectiveness with their clear understanding of the various moving parts and inner workings that contribute to high sales performance. These insights can help determine which levers (metrics) can actually help improve sales efforts and align the sales organization to the business strategy.

When it comes to sales metrics, one size definitely does not fit all. The key is to select a good mix of lagging and leading indicators – a set that not only helps you to measure results but more importantly, gives you the ability to predict outcomes. Going beyond the standard booking or quota achievement vs. target, here are five other metrics that I believe go a long way in ensuring sales effectiveness:

Sales Performance Metrics #1 – Funnel or Opportunity Pipeline:

In the current quarter, there is not much you can do to increase sales radically but you can still implement steps to make the sales grow for the rest of the year if you know where to focus efforts. This metric helps determine the nature of funnel and sales expected in future quarters/months. Organize and record each opportunity the sales team is prospecting and assign them a status such as “qualified” or “suspect” or “proposal” along with an estimated value associated with each of them. Assign probability percentage to each status based on your past performance at each stage. The sales people can then prioritize their time according to the probability of a win (status) and the impact of a win (estimated value). This metric is a dynamic metric and will keep changing as new opportunities come in or old opportunities move out as delayed or lost. The value of sale multiplied by the status percentage gives estimated total sales that you can expect at any period in the future provided the opportunities and stages of each opportunity are diligently tracked and recorded.

Sales Performance Metrics #2 – Sales Mix:

Based on the sales strategy of the year, one can come up with different mixes or ratios that need to be tracked as metrics for the year. This is essentially categorizing your funnel into different fields – say by nature (new, renewals or farming), by market segment (products, services, maintenance), by demographics or geography (Americas, Europe, Rest of World), by channel (direct, indirect). The ratios are arrived at by dividing the mix value by total funnel value. This gives a view on how far your strategy is being implemented at the ground level or if there is a possibility of good returns on investment made in any particular area. The sales mix ratios help zoom in on decision areas and decision types and can change from time to time based on the granularity of information available. Again, here is where the operations team can play a big role in ensuring that data strategy, quality and integrity is maintained in all systems – and garbage in-garbage out decision making is avoided.

Sales Performance Metrics #3 – Cost of Sales to Revenue Ratio:

This is a metric that used wisely and measured as a trend over time can show the overall efficiency of the sales team by segment, market or any other growth area that is in the strategy plan. The calculation should be based on the total costs for the selling efforts of each area of business. Total Sales Costs includes salaries, commissions and expenses for sales management, sales people and sales support. Divided by the revenue in the same period from the area of business, you can arrive at the ratio. I like this metric better than sales productivity (Revenue by number of sales people) as, in a global organization, salaries vary across regions, so does the revenues based on the nature of the business area. Measured over a period of time, it can give useful insights into where sales investments in terms of people is needed to get higher revenues, how long it takes for additional sales headcount to generate revenues and other such trends.

Sales Performance Metrics #4 – Conversion Rates and Ratios:

Conversion rates are very useful in identifying sales methodology or process issues, including poor proposal preparation, inaccurate forecasting or funnel categorization efforts, insufficient research into customer buying behaviors, core strength and weakness of sales persons. Conversion rates need to be measured at various steps of the sales process – the most common one is the win ratio –what percentage of qualified opportunities get closed as won. Other useful rates could be the percentage of deals that get lost after responding to proposals, percentage of qualified opportunities that show no movement over a long period of time, percentage of opportunities that are lost without any reason for loss – to pin point where the improvement is needed in the process and is useful in the qualification and prioritization of opportunities.

Sales Performance Metrics #5 – Gross Margin % by Sales Person:

This metric is a bit controversial as it is not generally used to measure performance of the sales team nor used in sales incentive plans. The general idea is that sales team is responsible for getting in the bookings and revenue and the rest of the organization has to ensure that margins are made. I am of the view that unless we track and reward sales people based on not only the volume of the bookings but also the quality of bookings, the organization cannot achieve its margin mandate. Discounting practices, pricing, “value” selling, terms and conditions on scope, timelines, milestones all affect gross margins and sales team has the highest influence with the customer to ensure favourable terms in these areas. So why not measure not only the actual gross margins of revenue by sales person but also future margins based on the funnel details? This will help the entire organization to plan and also help the sales teams to make the “right” (read profitable) sales.

“Gut feel” is all good but you also need the right data and indicators to validate your gut feel. On the other hand, no sales leader will want to go overboard on metrics and measurements that put additional load on the bandwidth of their teams taking time away from “selling” to filling in all sorts of data requirements. So, it is important to choose the right set and number of metrics to help focus strategy and efforts based on not only past performance but also through a rationalized view into the future to enable course corrections as necessary for the success of the business before it is too late.

So what is your story? What sales performance metrics do you think are must have leading indicators to improve forecasting accuracy? What are some of the more creative sales metrics that you have seen ? I would love to hear back and learn from you.

Pic courtesy: http://www.flickr.com/photos/ericparker/1537862310

Five Ways Sales Operations can Enable Sales Leadership – Business Operations Performance Management

Five Ways Sales Operations can Enable Sales Leadership – Business Operations Performance Management


The job of a sales person is to sell – to focus every minute of his/her work day selling – because if he/she is not, then no one else is! But the expectation from a sales person is not just sales, there are myriad activities that are essentially non-customer facing but are necessary – sales strategy, planning, reviews, forecasting, reporting and logging in data in CRM tools, inter-departmental coordination, the list goes on… chipping away into the 2000 hours in the year that the sales person has to sell. Various surveys suggest that almost two-thirds of a sales person’s week is spent doing something other than selling. Less time in front of customer is equal to less sales – simple. And that is where the sales operations function can step in. Sales operation is essentially the processes, infrastructure and administrative support necessary to help a sales organization run effectively, efficiently and in support of business strategies and objectives. There is immense pressure on increasing the sales productivity given the drive for better top-line and bottom-line growth in all organizations, big or small today and the complex selling environment. A good sales operations team if properly structured and empowered can increase rate of sales and repeat sales, cut costs and improve margins all leading to a sales productivity increase.

Sales Operations can do the balancing act between strategy and execution from the annual, quarterly and monthly planning and analysis to the day-to-day support of the sales force – all the while enabling the front line salespeople to meet and exceed their sales and margin quotas. Here are five ways in which sales operations can be the sales productivity accelerators for the sales leadership:

Sales Enabler #1 – Identify the Focus based on the Goal: What is the company’s goal for the period – is it top line growth or bottom line growth? The Sales operations team can work closer to field-facing sales in times when top-line growth is the highest priority or work closer to internal organization-facing operations in times when bottom-line growth is the highest priority. The balance that has to be done here by the sales operations team is not to become a “sales prevention” team nor allow a “cowboy/cowgirl” style of unregulated selling. This is what will drive sales operations focus and roles (great inputs by Eryc Branham here) for the period to support and enable sales leadership. For example – field facing activities like account planning, RFP support, lead generation and field marketing campaigns could take precedence over commission planning, contract vetting and approvals and finance alignment.

Sales Enabler #2 – Provide Knowledge out of the Data: With all the CRM and Social Media tools and technology available to sales today, data collection is not a problem (if you have solved the technology problem that is – Enterprise resource projects are notorious for their low success rates for achieving the intended outcomes – another area where sales operations can support sales leadership in the selection of the right tools, in getting them to perform the way they should and in increasing tool usage and acceptability within sales teams along with ensuring data quality). What is needed is extraction of the right set of data, comparing it against trends and benchmarks and providing  recommendations to the Sales leaders to help them decide the strategic direction they need to take.  Sales Operations can be the expert on and the single source of authentic knowledge for the sales organization.

Sales Enabler #3 – Process Setting and Ownership:  An effective sales process can go a long way in improving the win rate and increasing the repeat sales. A sales process is effective when it balances the needs of three stakeholders – the needs of the customer, the needs of sales person to meet his/her numbers and the needs of the rest of the organization to be able to execute on the sale. The sales operation team can not only help in the creation of the process but also take ownership of its documentation, adoption and implementation and support the sales people through opportunity to a win-win for all stakeholders.

Sales Enabler #4 – Metrics and Dashboards: One of my favorite topics and pet projects. Metrics need to be aligned to business strategy and objectives – metrics should not only measure the past performance but also act as leading indicators into the future and how it is developing over time. The selection of the right metrics (out of the many sales metrics that are used today) for the sales dashboards also depends on the audience. For example, leading metrics for the sales reps would need to be around their pipeline (sales cycle times and win/loss ratios per stage, etc. to determine pipeline volume requirements and key selling strategies). Sales Leaders would need to have consolidated pipeline and trend information and associated metrics (% of stuck opportunities, overall opportunity age, etc) so that they can help their teams achieve the desired outcomes. The sales operations team can model the data and propose the right sales metrics to the sales team and sales leaders based on what insights they need to meet and exceed their performance objectives.

Sales Enabler #5 – Be the Bridge between Sales and the rest of the Organization: The sales team has to be customer facing and focused on selling and winning deals. But, they can’t do this alone – they need the support of many functions (marketing, finance, delivery, legal, etc) within the organization to succeed. The sales operations team can be the liaison between the sales teams and other functions and help trigger a customer focused culture within the organization by reducing inter-function friction. The key here is of course to work towards driving a respect and trust based culture through providing the understanding of each other’s priorities and challenges. Sometime, sales operations will be the advocate and sometimes the buffer to balance conflicting pressures – a less stressed  happy sales engine will be the result.

So in the end, the sales leader should be willing to assign and empower the sales operations team so that they in turn can enable the sales leadership by giving them the gift of time and the necessary insights to achieve the balance between meeting short-term quarterly expectations and the long-term planning needed to ensure the next million/billion dollars.

Where else do you think the sales operations team can enable sales leadership and help the sales force be more effective ? What challenges have you faced as a sales operations professional ? I would love to hear back and learn from you.