Ever wondered why sales force measurement is met with resistance?
Here is a great example of why the culture exists.
For many years, sportspeople were seen as gifted talent, something that cannot be trained, measured, or improved. It was just natural for them and could not be replicated. Those people on any sporting field were elite athletes to be treasured for their unique talent, until one day, a man named Billy Beane of the Oakland Athletics major league baseball league proved that to be completely wrong. The story is documented in the film Moneyball.
Like sporting people, salespeople want to be known as special, possessing a unique talent that cannot be replaced. They have communicated their virtue, convincing everyone who listens for a long time. But, unfortunately, those same salespeople feel a sense of entitlement to that idealism. Maybe that may have been the case in times gone by, but it is not the figuratively 2014, and that adage no longer cuts it. Companies need to make money from average salespeople as the number of elite sellers is limited.
Sports and sales are working in the same parallel. Sports now have statisticians keeping a record of every move made by those sportsmen and women on any major field. People are placed in positions on the field based on their statistics and retained based on their ability to improve their numbers.
The Moneyball film exemplifies the value of measurement as Billy Beane built an elite team from B-grade players. Using statistics to build a team of elite sportsmen, he selected lower-cost individuals who could contribute the right behaviours to deliver results for the team.
A conundrum that many sales managers now face.
That same principle is now applied to sales force measurement using the same philosophy as Moneyball.
Consistent measurement has a direct link to sales growth. There are three key factors now:
- Effective sales management should review the performance of their team members and guide them on how to improve their effectiveness and efficiency.
- Building highly effective sales forces requires measurement tools that monitor trends and behaviours.
- Companies are shifting away from their reliance on a few top or A-grade performers and focusing on consistently performing B-graders.
The new lens of how sales are measured is instrumental in achieving growth.
Successful companies today embrace sales force measurement through the Moneyball methodology and look beyond sales quota or goal attainment. It’s not about one A-grade person pulling you over the line, making the big sale, or holding the primary accounts. It’s not only about whether you win or lose the sales revenue game; it’s how the team plays each month, quarter, and year.
Sales, like sports, can be measured with a number of statistics that can inform you about the selling prowess of your sales force, that is, if you choose to measure them. In addition, it can provide you with the vital transparency needed to effectively manage the team.
Sales organisations can benefit tremendously from individual performance statistics. It provides the ability to measure their ‘athletes’ and understand their effectiveness. However, they need assistance and guidance to deliver the results and the value they contribute to the organisation. Needless to say, it’s a hard ask of many sales managers, much like the same challenge Billy Beane was presented with in that infamous Moneyball scene during the boardroom selection. The old ways are comfortable even if they are not delivering results.
With the workload of the sales managers and the need for a different skill set for the analytical business side of sales – sales operations specialists are a valuable resource, as we covered in the previous Podcast.
For those companies looking through a new lens and taking a contemporary view of sales forces, understanding the value of sales force measurement and Moneyball is pivotal to growth. However, determining what to measure can be daunting, and every business is different. In addition, their sales process and requirements vary according to the complexity of the industry and the products they are involved in.
But here are just a few good measures you can start using now, and they will immediately inform you as to the effectiveness of your sales team.
- Average Deal Size: How good is the salesperson at working with higher-value customers or up-selling? How quickly do they discount sales? How well can they negotiate? The average deal size provides insight into how well a salesperson can manage larger sales opportunities, maintain pricing integrity, and drive greater value into the sale.
- Win/Loss Ratio: Typically measured now through CRM but not often reviewed closely enough. You need to know what percentage of opportunities the salesperson closes. How effective are they with the opportunities they uncover or leads they are handed? A higher winning percentage suggests an impressive ability to qualify or add substantial value to the sale. Conversely, high winning percentages mean fewer leads and opportunities are wasted.
- Average Days in Pipeline: Take all the opportunities in the pipeline and add up the number of days they have been in the pipeline, then divide by the number of opportunities. How long do deals sit in the pipeline? How good is the salesperson at knowing when to stop working on a deal and close it? How often is the salesperson sitting on opportunities that never come to fruition? Is their pipeline full of dreams (or padding)? Is there a decent ratio between the average days in the pipeline and the average time to close? There should be.
- Average Time to Close: How long does it take for a salesperson to close a deal from start to finish? Who is your sales force that closes deals faster? Who takes longer? How do average time-to-close rates compare with sales goals achievement and overall revenue achievement? If they are out of sync, revenue achievement can be problematic. The average time to close includes both wins AND losses. It’s designed to measure a salesperson’s time to bring a buyer to the decision.
- New Opportunities per Month (NOP): Who is best at building their pipeline? Which salespeople are focused on new opportunities vs. closing existing opportunities? How many new opportunities are your salespeople putting into the pipeline each month? NOP is a critical metric that few pay sufficient attention to. Yet, knowing who is bringing in the opportunities is vital. A salesperson who cannot generate new business is of little value to most companies in today’s competitive marketplace.
- Average Monthly Pipeline Size: What does the pipeline look like from month to month? Who is good at keeping it consistent with quality vs. those who see big shifts as they close, prospect, and then close? This lets you know who can maintain a strong pipeline while closing sales and driving revenue. Who delivers reliable and predictable revenue to the business.
It is time to install the Sales Focus Money Ball as your sales management methodology. There are more critical metrics you can measure, but this will give you a starting point. Good salespeople will be found even in bad years, and bad salespeople will no longer be able to hide.
Sales are about the efforts of individuals and not just a team pooling of results. A-grade players are scarce, so you need consistent returns from your B-grade players. One-hit wonders, or the rare blue-whale deal signers, will not be able to bask in the glory of a lucky break that most likely landed in their lap. Instead, they will be shown to be poor performers once that deal is made.
Making this fundamental shift in sales measurement will see executive management have more information to work with, trends will be easier to identify, and quality decisions can be made.
For consistent sales measurement, hiring a sales operations person underpins the process.
If you would like to discuss how to improve the performance of your sales organisation and install sales force measurement systems, please contact our office.
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