So, just how are you measuring the performance of your sales team, or the effectiveness of your Salesforce training? A surprisingly common answer that we get is “revenue attainment”. Yikes! And to make this even worse, sometimes this is the only number that is being tracked.
The problem with measuring revenue as an indicator of the sales team’s performance, is that revenue is not a sales metric. It is a result. Sales leaders cannot push the needle on revenue anymore than they can turn a farmer into a hunter. What sales leaders should be focused on is working with their salesforce to improve specific activities – both the effectiveness (i.e. how well) and efficiencies (i.e. how much) – that will lead to quota attainment. In other words, the different yardsticks of your salesforce KPIs (Key Performance Indicators) that you’ve determined are the foundations of the right sales activity for your sales people. As long as your sales people can achieve the salesforce KPIs on a daily basis, and are performing each to the right degree of effectiveness, then the revenue is certain to follow.
This is why we often tell organizations, that while we certainly want, and expect our training programs (which include healthy amounts of workshops AND post-workshop coaching and measurement) to work, we simply cannot base their effectiveness of revenue. For one, the revenue component is usually the factor of many different elements, some of them at cross-roads with the training taking place. Secondly, the revenue is generally months behind the change in activities, and therefore much harder to measure and isolate against the training program.
Instead, our job, is to move the needle on behavior – basically changing both the effectiveness and efficiency of the activities that we both have deemed to be critical in the attainment of the sales goals.
Now, let’s look at whether or not a data point should in fact be something we want to consider as a KPI. There are basically four steps to identifying the right data points for your salesforce KPI’s.
1. Are Your Salesforce KPI’s Measurable?
Remember the basic rule of a SMART goal (Specific, Measureable, Action Oriented, Realistic, Time Bound)? If the area of the business that you want to affect cannot be measured statistically, then how will you ever know whether or not it is working? Too often, we hear of reps who benchmark an opportunity by “trusting their gut” as a meaningful data point. It should go without saying that gut instinct does not belong in a salesforce KPI. You simply must have a way to track the data easily and efficiently.
The key to measuring data is to ensure that you determine all of the relevant activities that ultimately must happen before a deal can be won. Things like number of cold calls, number of connects, number of meaningful conversations, number of proposals, number of follow-ups, number of wins, etc. Now, you mt also be able to track each of these. This is where a true CRM, like Salesforce.com is essential. Yes, you can (and many firms still do) use tools like Outlook and Excel, but that is cumbersome, not truly scalable, and is prone to creating errors in the data. With a properly configured Salesforce.com system in place, tracking these data points is simple. Remember, you cannot manage what you cannot measure.
2. Are Your Salesforce KPI’s Significant?
Just because you can measure a data point, it doesn’t mean that it belongs in your sales management KPI’s. Just like in baseball, there is virtually no end to the data that can be measured in a sales organization. Baseball teams and commentators commonly use a series of statistics, like BA (Batting Average), ERA (Earned Run Average), WAR (Wins Above Replacement) to present how well (think Mike Trout) or poorly (think J.P. Arencibia) a player is performing.
The problem is that some data can be manipulated to show both a positive and a negative ramification. And some data, while interesting, is just plain useless. The key is to determine what are the most critical functions that leads to a sales person’s success and include only those in your KPIs. For instance, total number of daily cold calls is likely quite relevant, however, number of third voice mails left to a new prospect, may not be terribly important. If you can in fact link the activity to a sale, and show a strong correlation between doing more of that activity and getting more sales, then you have a significant data point.
3. Are Your Salesforce KPI’s Goal-oriented?
Statistics without goals tell you very little about performance. Each statistical component of your salesforce KPI’s needs to have a matching goal. When performance discussions take place with the sales person, their performance versus goal achievement serves as the focus of the agenda. This is a significant change from the typical discussions that are focused on whether or not sales quota was attained.
When setting the goals for your salesforce KPIs, there is an important consideration. Remembering back to report cards from school, students achieved a letter grade based on their performance. A few kids received an “A” which meant they had delivered stellar performance. However, average performance reflected a “C” on the report card. If your sales person achieved the goal for a particular metric, what does that mean? Was their performance exceptional? Or did they perform at the mere minimum acceptable level to keep their job?
If you set your goal levels so that they mean A-level performance, you should expect few of your sales people to hit them. If you set them at the C-level, you are establishing the baseline for minimum acceptable performance. There isn’t a right or wrong approach between the “A” and “C” philosophies. The key is to select one, understand its meaning relative to performance, and handle achievement accordingly.
4. Are Your Salesforce KPI’s Trainable?
The final component is to identify the coaching that can be provided to a sales person who is not achieving a defined metric in the system. Since the metrics that you are managing are critical to a sales person’s success (significant), when a sales person is not meeting the target, then coaching is a must. Here, you must determine if the failure to meet the target is as a result of low activity (easier to spot) or ineffective behavior (harder to spot, but becomes fairly clear with some basic observation). When you identify each KPI, if a sales person is not achieving it, what potential weakness/es does it expose? As a sales manager, you can then begin digging to determine the root cause and help the sales person improve.
Just like many think that revenue is a metric, many think that if a sales person is failing to achieve their revenue quota that they cannot close. It’s possible that closing is the issue. However, if you have your salesforce KPI’s in place, you may find that closing isn’t the issue at all. Perhaps, the sales person doesn’t have enough activity in their pipeline. Or, that they struggle to move prospects through the buying process. Or, any of countless other possible issues. Managers who have their sales metric management system in place can quickly identify the problem area and address it.
Designing your salesforce KPI’s sets you up to create an effective sales compensation plan. Remember, your sales compensation plan tells your sales people where to invest their selling time. Thus, the compensation plan reinforces your salesforce KPI’s.
SalesForce Training & Consulting is a professional coaching and training firm that specializes in helping companies navigate their way in a Salesforce.com environment. SalesForce Training is based in Toronto, with trainers in Boston and Chicago, providing sales coaching, sales management consulting, Salesforce.com training and Salesforce.com Admin support, sales training and sales personnel assessments.