A constant question is how to get a sales organisation to be more effective. It shows itself in many ways, but the underlying question is that old management challenge of how to achieve more with less.
Summary of the big takeaways in this article
- Managing sales effectiveness is the primary tool of achieving greater sales results with a given level of resources
- Sales objectives can only be influenced, but sales activities can be directly managed
- Use sales activity metrics to improve sales effectiveness and drive change in sales results
You can’t manage what you don’t measure
You can’t manage what you don’t measure. It is an old management adage that remains accurate today. Unless you measure something you don’t know if it is getting better or worse. You can’t manage for improvement if you don’t measure to see what is getting better and what isn’t.
It’s rare I meet people who talk about sales effectiveness. More often, the subject gets on the table from one of these routes:
“We’re going for 20% growth next year”
Fantastic! So what specifically are you going to do differently that will achieve the 20% growth? Maybe employ 20% more sales people, or find a way of increasing the effectiveness of the current sales organisation by 20%?
“We need to reduce SG&A”
Yep, everybody does, all the time. So if you’re reducing SG&A, do the savings include reducing the size of the sales organisation? And if they do, how are you going to achieve the same results with less people (or in some especially gung ho organisations, how are you going to achieve that growth objective with less salespeople)?
“The sales organisation isn’t producing the results we need”
Usually accompanied by “Fire the sales manager”. The challenge is to get more results out of the same resources by doing something differently. (As an aside, I help lots of companies with this, see “Sales Strategy and Effectiveness Audit”). The challenge is, what needs to be done differently?
Sales objectives and sales activities
Before going too much further with this line of thinking, here are two principles:
- There are some metrics the sales organisation can INFLUENCE, but can’t CHANGE. Interestingly, revenue is a great example. Every sales organisation measures revenue, but when you boil it right down, it’s a metric the sales organisation can influence, but it can’t change. Customers change it by buying stuff.
- There is a direct link between Sales Activities and Sales Objectives. At a simple level, activity metrics can be established that lead to the achievement of sales objectives. So for example, in a sales organisation it might be found that it takes 4.7 calls to make a sale.
Sales objectives are achieved by managing sales activities
So what is the message here?
Simple – managing to sales objectives isn’t necessarily going to change the results. If the objective is sales revenue, the achievement of the sales objective is actually in the hands of the customers.
However, knowing the metrics of sales activities that lead to sales results is a number that can be directly managed. So if you know that it currently needs 4.7 calls to make a sale, and you need to increase the sales results by 20%, all you need to do is find a way of increasing the number of calls by 20%.
Alternatively, you might want to pursue the option of reducing the number of calls to make a sale through improved processes or skills, in which case the activity level can stay the same, but its effectiveness has to increase. To achieve the 20% growth, you need to manage the calls/order ratio down to 3.8 – a 20% reduction.
In both cases you have a metric directly within the control of the sales manager that can be measured and managed.
Activity measures are for losers
How many times have I heard that? The problem is people confuse activity measures with sales incentives and commission and say things like “I’m not paying out for the number of calls made – that’s for losers”.
Be clear, we’re talking two separate disciplines here that are related, but different.
Sales performance management is about ensuring the sales organisation does what it needs to do to achieve the results required. That’s different to sales incentive compensation which is about paying out for sales objectives being achieved.
So your sales performance management system is where you track and manage the activities that need to happen, and your sales incentive plan is where you pay people for achieving the sales objective. Related, but different.
What do you need to do?
You need to understand the important activity metrics you can use to predict sales results, and especially the ratios between specific sales activities and specific sales results.
The activities you measure will vary from sales organisation to sales organisation, but some pointers might include:
- Number of calls
- Number of calls/order
- Number of calls/$ order value
- Number of major accounts with a current account plan
- Number of proposals issued
- Drop-out rates at different pipeline stages
- Sales training investment
- Sales manager hours spent coaching
The common element is they are all metrics a sales manager can directly manage and measure change.
The message? Get clear about the relationships between sales activities and sales results in your business. And then start managing them. Like day follows night, the sales results will follow.
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