In this series of articles, we will introduce the research findings from the best-selling book Cracking the Sales Management Code, by Jason Jordan and Michelle Vazzana. These foundational insights have transformed sales management thinking within global companies like GE, 3M, Tyco, and many others. In this first installment, we highlight the often ignored truth that you can only get what you want tomorrow by focusing on what you do today.
A Sea 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 a CRM tool of some variety, and dozens of management reports are only a mouse click away. 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 potent sales management?
We believe it’s because much of the data being collected today is not very useful in actually managing salespeople to higher performance. We are awash in numbers, but executives lack a framework 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, they could enjoy the same level of control and manageability as these other business functions.
To understand the current state of affairs, we examined 306 sales metrics provided by dozens of global sales forces in a survey conducted along with the Sales Education Foundation. This research into the key performance indicators that leading companies use to manage their sales forces was highly insightful, and it revealed a straight-forward framework that all executives can use to better manage their selling effort.
Can You Manage that Metric?
When we first examined the 306 sales metrics, we discovered that each sales force had organized its data in very different ways. Though there were many metrics in common across the companies (Percent of Reps Attaining Quota, Percent Cross-Selling of Products, Dollars Spent on Training, etc.), there was little commonality in the way the measurements were organized.
For instance, one company had sorted its metrics into Internal and External measurements, but it had revenue metrics in both groups. Another had organized them into buckets of Revenue, Costs, and Salesperson measures, though the Salesperson metrics included both Revenue Per Sales Rep and Cost Per Sales Rep – both of which could clearly also belong in the other buckets, Revenue and Costs. In the end, the metrics were organized (or not) in as many different ways as there were respondents to the survey. Yet, 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 control does a sales manager have to directly alter 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 ratio. An example of an ‘unmanageable metric’ is Revenue Per Rep. No sales manager can simply command a salesperson to obtain more revenue (though many have tried). There are many factors that affect a salesperson’s revenue production, 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 all of the sales metrics fell.
Directly Manageable Metrics: SALES ACTIVITIES
All of the metrics that we deemed directly ‘manageable’ were related to salesperson or sales manager activities. These activities 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 they provide to their reps, or the number of hours that they spend on coaching. 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.
Sample 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 metrics have a very high value in managing a sales force, because they are highly controllable. For front-line sales managers, these should be the primary pieces of feedback about the ongoing performance of their salespeople. In fact, 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 stated objectives.
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.
Another example of a Sales Objective would be to increase New Customer Acquisition. Again, this is not a directly manageable metric, because a sales manager cannot command a prospect to become a customer. But he can increase the volume of prospecting calls that his salespeople make – a Sales Activity that should lead to winning more new 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 make the new objectives happen. Sales Objectives serve as the goal posts toward which you point your sales force. You achieve these objectives 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 the entire enterprise strives 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 (and they are) 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. So it’s best to stop trying.
The Lesson for Sales Leaders
Interestingly (but not surprisingly), we discovered that sales forces are obsessed with the things that they want – not necessarily the things that they actually do. The organizations in our study collected a fairly 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. If you are like most sales leaders:
You are focusing your attention on things that you cannot manage.
In fact, it is likely that the vast majority of the things you are measuring (83% in our study) are completely uncontrollable through the direct actions of your sales force. You want revenue to grow, but you cannot expect to manage it. To exercise control over your desired sales performance outcomes, you have to focus first on the Sales Activities that will drive you toward your desired Sales Objectives. And if that quest goes well, then you will achieve success in the form of better revenue, profitability, and market share numbers.
But if you focus first (or even exclusively) on the Business Results you want, you’ll be wasting your time on a wish that very well might never come true. Sure you can stare at your revenue target and keep your fingers crossed, but it would be a much more productive use of your fingers to point your sales force in the right direction. And that comes from knowing the Sales Activities and Sales Objectives that will get you where you want to be.
If after reading this you feel some remorse for the years you’ve spent obsessing over uncontrollable outcomes, rest assured that you’re in good company. Most sales forces we worked with share your obsession with the outcomes you desire, rather than the activities that will actually produce your desired results. Fortunately, our research revealed that there is a better place to obsess. Spend your time worrying about the things your sales force is doing today. And then a bright tomorrow will come.
In the next installment of this series, we will reveal the 5 distinct Sales Processes that we discovered in our research, along with the metrics that are critical for managing each.