This article was originally published by Xactly.
How do you measure sales performance? Such a broad question. It’s so general that when asked, those tasked with answering usually shoot straight to goals and results—lagging indicators, primarily. Revenue per rep. Quota attainment. Or perhaps a bit deeper with win rate, deal size, or other traditional sales measurements.
While these are metrics that must be tracked and reported on, how are they really helping you to improve sales performance? Once you’ve been hit with the fact that sales have fallen short of forecasts, it’s too late for adjustments. You’re just left knowing you have to be better.
For all of the resources you put into measuring sales performance, you deserve more than that.
You should be experiencing “a-ha” moments, and setting out to tackle specific action items based on what the numbers are telling you—and not forced to explore handfuls of “could-be” reasons.
To help you get there, start by considering as much of the entire sales performance measurement equation as possible:
- Are you tracking both lagging and leading indicators?
- How do all of these metrics fit together?
- When/how often should you be measuring sales performance?
Take a minute to step away from sales and think about it this way:
When film critics give their opinions of movies, imagine if their reviews were solely based on whether flicks were funny or not—plenty of laughs, thumbs up; only few chuckles, thumbs down. Would that be a measure of a movie’s true quality? What message would that send to future filmmakers? I mean, I like Tommy Boy a lot, but come on now. Or what if critics only looked at the leading inputs, like the actors in starring roles, or only the lagging outputs of ticket sales, and then gave their ratings without even taking the time to watch films and all of their complexities unfold?
Regardless of what you’re measuring or reviewing, fixating on the wrong metrics or observing them in isolation can easily result in a skewed view of reality or a misunderstanding of what’s really important.
You can’t just center on one area over another out of convenience—your focus should align with your goals, and you must understand how the measurements to which you’re holding reps accountable influence their behaviors. Of course, this is all for not if you lack the willingness to make modifications or amplifications when performance is falling below or above the norm. If not, why even go through the trouble?
Which metrics should you measure (and what can you learn from each)?
As alluded to, leading indicators can and should be monitored in real-time. The goal with such measurements is to gain insights into what the results – or lagging indicators – are going to resemble at the end of the period. It’s much easier to take action when you know sales call volume and leads have decreased, versus just knowing that sales have dropped off, right?
Time Spent Selling
Given that time is literally money to a sales rep, measuring time spent selling can uncover valuable info. Perhaps reps are spending too much time on administrative tasks, or chunks of their days tracking their own commissions and talking with finance about the accuracy of their payments—rather than being able to refer to commission tracking software for all of the dependable answers.
Other common time sinks include reps getting sucked into non-sales calls and internal conversations/meetings, socializing, or even traveling. All of these activities seem harmless on the surface, but like all things, they add up. Here are some tips on measuring selling time.
With that said, where’s the sweet spot? There are arguments made in favor of the fact that reps should be spending as much time as possible on direct selling activities. But, looked at differently, reps will never spend 100% of their time selling. That’s the facts.
Knowing this, some reps might need to actually spend less time selling, and more time coming up for air by engaging in training or being coached to better their sales performance—whether that’s on their own, with managers, or amongst peers.
In addition to training, think about those non-selling activities that can actually result in more selling time, after a small initial investment. For instance, perhaps reps can relinquish a bit of control of certain tasks and train support roles to assist where it makes sense. Or, maybe a rep’s non-selling time can be used to mentor junior reps, which in turn would allow them to pass along certain prospecting duties and potentially even more.
Lead Response Time
Time is just as valuable when you’re looking at how long it takes reps to follow up on leads. Waiting even more than a short five minutes might be too long:
- Inside Sales notes that reps experience a “21x uplift in qualifications” if they reach out within five minutes compared to 30 minutes.
- Hubspot says those who perform outreach within five minutes are “100 times more likely to qualify the prospect.”
- If you wait an hour, you might be seven times more likely to qualify the lead than if you were to wait another hour.
- And, this Docurated post warns against waiting a full 24 hours, or else you might be 60 times less likely to qualify the lead. Ouch.
Putting the stats aside, think about the resources that go into creating leads from marketing and other areas. Capturing such interest in your product or service is a crucial first step on your way to achieving more sales. It’s only right the time that it’s taking for leads to be followed-up on is measured and treated with as much care as possible.
While the leading indicators above require relatively more effort to track and review, they’re also extremely actionable. On the flipside, the lagging indicators below are easier to measure, but can prove difficult to turn into “next steps” if you’re not also considering the inputs along the way.
Opportunity Win Rate
Before you can close a deal, an opportunity must first be created (from the precious leads just mentioned above). Just like how every person who visits your website isn’t ready to trade their information for more of your content, not every lead that is generated is going to be one interested in making a purchase.
Win rate is the measure of how many of those created opportunities were actually sold to. If win rate is found to be low or in decline, it begs the next question of “why?” Was it lost to a competitor? Did the prospect opt for an internal solution? Or did they decide not to pursue any solution altogether?
Likewise, it’s not enough to know a deal was lost and why, but you want to track where it fell out of the funnel. If early, then it could be a symptom of poor rapport building or lack of effectiveness with demo presentations—or it could mean you need to improve qualification altogether in order to ensure the right opportunities are entering the pipeline.
If later in the funnel, then losses could be a symptom of poor negotiation skills or the inability to skillfully close. While training and coaching can help boost any lacking skill, always remember that training might not be enough in some cases. As this Salesforce article points out, it might be time to move poor-closing reps into different roles so they can excel at opening doors for others who are better equipped in sealing deals.
And an important point—you aren’t just measuring sales performance in an attempt to identify poor performance. You also want to identify where individuals are succeeding – then also dig into why – in hopes of discovering something you can roll out to the rest of your team.
Last, as a reminder, when a metric like this is viewed in isolation, your ability to take action is difficult. A low win rate might not have as much to do with the individual rep’s skills and abilities as it does with size/difficulty of the deal, or likelihood to close based on the original source of the lead.
According to David A. Brock, Founder and CEO of Partners in Excellence (as stated in our guide, “Inspiring Sales Rep Performance”) “focus on vicious disqualification.” Pipelines can become clogged with low quality deals, with time being wasted for poor returns. “Know your sweet spot, focus on finding the right deals with customers that have a high sense of urgency to change. Your win rate will skyrocket.”
Average Deal Size
What is the average sales price or amount of revenue brought in from your closed deals? If you’re spotting deals coming in below average, it may be a sign of reps opting for smaller, easier wins, or, that they are even discounting “normal” or average deals down too much just to make the sale.
On the flipside, if deals entering the pipeline exceed the average, you might want to reevaluate the opportunity. Meaning, if you’re going to lengths to ensure reps are spending as much of their time selling, perhaps them “selling” by chasing a difficult deal isn’t the best use of their day, either.
Which brings us to another point. How does all of this fit together? If you’re tracking these different metrics, how can you make sense of it all. The Sales Blog breaks things down a bit in this regard. For example,
- You have a rep with a revenue target, say it’s $1 million in sales.
- If your average deal size is typically $100K, that’s 10 deals that need be closed.
- If your rep’s win rate is typically 25%, that means they’ll need chase 40 total opportunities.
- How does that impact their work in nurturing those 40 opportunities?
- What if an opportunity enters at $250K, is that good or bad?
Sure, a simplified illustration, but when measuring, you need to constantly be asking if the results you’re seeing are painting a picture of a realistic or achievable landscape. If larger deals are on the table, that would mean your rep needs to close less deals in the long run, but they’ll also need to expend more resources in attempt to close the big ones. What if the big deal doesn’t work out when all is said and done?
There are of course many other metrics to consider, and your selection of which to track greatly depends on your unique situation. Check out these additional resources from Docurated, Salesforce, and InsightSquared for more information.
How often should you be measuring sales performance?
To close, how often should you be measuring all of this? Again, it depends on the metrics you’ve chosen to monitor. If you’re measuring something like “calls made” or “emails sent,” then it might make sense to track daily or weekly, while something like “meetings held” can be measured monthly, and so on.
So without trying to speak to every scenario, let’s look bigger picture.
What makes a sales rep tick? Or said differently, what makes a sales rep a sales rep, and not some other role, like a graphic designer? One big differentiator is that reps are competitive; they like to contend, and they like to win those challenges.
So how do you motivate those who are driven by the thrill of victory? Give them a game to play in. How do you keep them motivated? Give them more games to play in. If reps know their performance in a certain area is going to be measured at the end of the week, you’ve created a new challenge for them to meet. A month chunked up with four weekly milestones should keep reps motivated more than holding them to only one check-in at the end of 30 days.
As a larger example, performance driven by quarterly quotas differs from performance driven by annual quotas, as our data shows that 67% of reps make greater than 80% of quota on a quarterly plan. However, if you have an annual quota plan, that drops down to only 60% of reps making greater than 80% of quota.
Why? One reason could be the virtual “reset button” quarterly measurement provides. As reps get deeper and deeper between annual milestones, it’s only human for them to think either “I have plenty of time to pick things up,” and then they just continue coasting, or, “I’m already failing, so I might as well cruise from here on out.” In both cases, their performance probably won’t pick up or can even diminish by the time the year ends.
Apply that to how more frequent measurements and reviews could impact the psychology at play if you’re conducting daily, weekly, and even monthly check-ins. Thus, you might want to be measuring sales performance as much as the sample size will allow you to. If your metric provides enough data for a weekly review, it might be in your best interest to not wait a month in that specific instance, and so on.
At the end of the day, “people do not respect what you expect, they respect what you inspect.” You’d be amazed at the impact of inspection and how bringing performance measurements into the light can change behaviors for the better. The only way you can do so is by tracking the right leading indicators, reviewing them regularly, and then working to improve performance in the areas your metrics are telling you it’s lacking.