Despite being awash in numbers, more sales data has not resulted in better sales performance. Therefore, it is critical that leaders understanding the sales metrics that contribute to effective sales management.
Sales Activities, Sales Objectives, Sales Results
Over the past decade or more, information systems have vastly improved the measurement and reporting capabilities within the sales function. However, this increased access to data has not been accompanied by a corresponding increase in control over sales performance. Why is it that more sales data has not necessarily resulted in better sales management?
We believe it is because much of the data being collected today is not very useful in actually managing salespeople. Despite being awash in numbers, executives lack a framework that they can use to consistently pinpoint problems and proactively manage change. If sales leaders had an interconnected system of meaningful performance metrics, like their finance or operations peers do, they could enjoy the same level of control and manageability as these other business functions.
To understand the current state of affairs, Vantage Point Performance partnered with the Sales Education Foundation to survey sales leaders to uncover the metrics that companies use to manage their sales forces. The survey identified 306 metrics that are considered key to sales leadership for effective sales management. This research reveals a straightforward framework that can be used to better manage sales.
Organizing Sets of Chaos
When we first studied the metrics, we found that each sales force had categorized their metrics in very different ways. Though there were many metrics in common across the companies, there was little commonality in the way the measurements were organized.
Frustrated by the lack of structure the survey had provided, we decided to put all of the 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 each metric?” That is, how much control does a sales manager have to directly affect the 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 number.
An example of an “unmanageable metric” is revenue per rep. No sales manager can simply command a salesperson to have more revenue (though many have tried). There are many factors that affect a salesperson’s revenue number, so it, therefore, cannot be directly managed by a sales leader. Using this one criterion as the basis for our undertaking, we soon discovered three distinct levels of “manageability” into which nearly all of the metrics fell—Sales Activities, Sales Objectives, and Business Results.
Highly Manageable Metrics: Sales Activities
All of the metrics that were deemed directly “manageable” were related to salesperson or sales manager activities. These Sales Activities (and the larger processes to which they belong) can be managed through unilateral decisions of a sales manager.
For example, sales managers can direct their salespeople to complete account plans for their major customers, or they can select the types of training that they provide to their reps. These types of decisions provide the only sales force metrics that can truly be managed with any level of certainty and control because they are the immediate results of actionable decisions by a salesperson or manager.
Indirectly Manageable Metrics: Sales Objectives
Many of the metrics we observed were measures of success in achieving specific selling goals or Sales Objectives. Sales Objectives are not unilateral decisions that can be directed by a manager since they require some level of agreement by customers or employees, but Sales Objectives can be influenced indirectly by managing the preceding Sales Activities that lead to Sales Objectives. For example, a sales manager cannot direct a customer to hand over a higher share-of-wallet (a Sales Objective), but they can direct their salespeople to increase their account planning activities (a Sales Activity) which should ultimately affect the share-of-wallet they receive from their customers.
Sales Objective metrics have a high value in diagnosing problems and planning future Sales Activities. They help you to measure what you’ve achieved, determine what you want to accomplish, and decide how you need to change your processes to make the new Sales Objectives happen.
Unmanageable Metrics: Business Results
Our final category of metrics we observed, Business Results, include very high-level outcomes, often at the enterprise level. Business Results have no direct relationship to Sales Activities or processes and cannot be managed directly. Business Results can only be influenced by achieving certain intermediary Sales Activities that are driven by Sales Objectives that lead to desired Business Results. For example, a sales manager cannot directly affect market share (a Business Result), but an increase in customer share-of-wallet (a Sales Objective) should lead to an overall increase in market share.
Business Result metrics have a high value in reporting. These enterprise-level measurements must be monitored (and they are) with great attention, though their only active role in management is in measuring success and determining which Sales Activities and Sales Objectives need to be changed.
Implications for Sales Leaders
The implication for sales leaders is that collecting metrics at only one level (e.g., revenue) is leaving to chance the Sales Objectives and Sales Activities that are critical in achieving the desired Business Results. Sales Activities, Sales Objectives, and Business Results must all be measured and reported, if sales executives want to truly exercise control over their sales forces and manage their salespeople toward desired results.