Using Metrics to Drive Sales Force Execution What New Research Reveals about Measurements, Processes, and Good Sales Management

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1 Using Metrics to Drive Sales Force Execution What New Research Reveals about Measurements, Processes, and Good Sales EXECUTIVE SUMMARY The business of managing Sales is undergoing a transformation. It is a change that has already taken place in other business functions like operations and finance, where they abandoned art and embraced science, enabling them to lead their organizations with confidence. However, there are still some missing pieces in the sales management puzzle. The biggest missing piece is a lack of insightful performance metrics that senior executives can use to pinpoint problems and proactively manage change. Over the past decade or more, information systems have vastly improved the measurement and reporting capabilities within the sales function. However, this increased access to data has not been accompanied by a corresponding increase in control over sales performance. To make the most of this avalanche of sales data, executives desperately need a clear understanding of: 1) Which metrics are most meaningful for their particular sales forces 2) How those metrics can be used to proactively influence their sales force s behaviors Based on the examination of 174 different metrics that 17 leading organizations use to manage their sales forces, we have uncovered new insights that will help executives drive dependable execution within their sales forces. In this paper you will discover: The metrics you choose to manage your sales force will determine how manageable your sales force actually becomes. 74% percent of the metrics being used to manage sales forces are not directly related to salesperson or sales manager activities. Such metrics can be valuable for planning or reporting purposes, but they cannot be used to directly influence your sales force s behavior. Learn which metrics you managers can use to guide your salespeople s performance. Types of Sales Metrics Revealed in Our Research Business Results Financial Metrics Pipeline Metrics Customer Satisfaction Employee Satisfaction Market Share Used to Report Progress Sales Objectives Sales Force Capacity Salesperson Capability Product Focus Customer Focus Human Capital Used to Diagnose and Plan Sales Processes Call Time Account Opportunity Sales Force Territory Used to Manage Salespeople Copyright 2010 Vantage Point Performance, Inc. 1

2 Implementing the right processes for your team is critical to proactively measuring and managing the selling effort. There are several distinct sales processes each with its own business purpose, day-to-day activities, and supporting tools. Which processes you need in your sales force depends on the nature of your selling roles. Learn which process you need (and don t) in your sales force. The key to executing your go-to-market strategy is to set clear objectives and link them to the daily activities of your sales force. Sales objectives give your sales force guidance on what they should be doing in the field. Without clearly stated objectives, your salespeople will do whatever they perceive to be the right things often inadvertently working against your overall goals. Learn how to identify and communicate your key sales objectives. An interconnected chain of accountability and measurement ensures that your sales force is pursuing objectives that will achieve your desired outcomes. A sales force should help your organization attain its desired business results. The task for executives is to provide direction to the sales force on which sales objectives to pursue in order to achieve those results. It then becomes your sales managers task to embed those objectives in their salespeople s activities and ensure that the salespeople execute. Learn how to create this chain of accountability. 1. Identify the Results you want to achieve Using Metrics to Drive Sales Force Execution 2. Select Objectives that will lead to those Results 3. Embed the Objectives in the relevant Processes, and manage the processes relentlessly Business Results Sales Objectives Sales Processes Sales is evolving from an undefined art into a highly manageable science. Companies that continue to operate without good sales processes and metrics will be left behind by competitors who can shift their strategies at any time and watch with confidence as their sales forces behaviors shift in synch. Implementing a system of processes, metrics, and tools to manage your sales force is a key checkpoint along the road to sales excellence. Our new research provides a comprehensive roadmap for your journey. Benchmark Your Own Sales Force against Our Findings Sales Force Execution Scorecard Strategic Clarity Process Implementation Metrics/Reporting Overall Ability to Execute 100% 74% 58% 65% Coaching Ability Supporting Tools Incentive Alignment 25% 60% 90% Copyright 2010 Vantage Point Performance, Inc. 2

3 Using Metrics to Drive Sales Force Execution What New Research Reveals about Measurements, Processes, and Good Sales Prepared by Jason Jordan Principal Copyright 2010 Vantage Point Performance, Inc. 3

4 Introduction Vantage Point Performance recently completed new research into the performance metrics used to manage world-class sales forces. We analyzed survey responses from 17 major corporations and consultants, who provided a total of 174 specific metrics that are used to manage such organizations. 1 Though our research was originally focused solely on sales metrics, our analysis soon shed light on other related areas of performance management, such as selling processes and sales objectives. In sum, we derived from the research a new sales management system that will increase a sales leader s control over the behaviors and productivity of their sales force. In this paper, we will share with you the many new insights that we gained including: The three types of sales metrics Which metrics can be managed and which cannot The six types of sales processes How to identify the processes and metrics that are critical to your sales force The five types of sales objectives How to set meaningful objectives and link them to salesperson activities How to manage your sales force to achieve optimal business results Early feedback from top sales executives and thought leaders tells us that our findings are a meaningful advance in the understanding of sales force execution. Please feel free to contact me directly with your own thoughts, experiences, or questions. Jason Jordan Vice President [email protected] 1 Source data was received from the University Sales Education Foundation, a not-for-profit organization committed to advancing the profession of Sales through education in universities and colleges. Please learn more at Copyright 2010 Vantage Point Performance, Inc. 4

5 Table of Contents Our Point of Departure... 6 What We Learned about Metrics... 8 What We Learned about Processes What We Learned about Sales Objectives What We Learned about Business Results What We Know about Implementation (including examples) A Case Study and Concluding Thoughts Copyright 2010 Vantage Point Performance, Inc. 5

6 Our Point of Departure Two years ago I found myself sitting in the Manhattan headquarters of one of the largest media companies in the world. At the table were the company s president, its SVP of television networks, the SVP of its online properties, SVP of print publications, and several other senior executives. The topic of the day sales. My consulting firm had been hired to assess why the company s many sales forces, which were aligned by type of media, were not successfully cross-selling each others products. As we began to discuss our findings, the president chimed in: Did you take a look at the compensation plans? Yes, I replied. There is definitely a problem there. Most of your salespeople have no incentive to sell the other business units products. In fact, in some places there are effectively disincentives. The president said, I knew that was a problem. We should redesign all of our compensation plans immediately, so we can get our salespeople selling all of our products to all of our customers. That is definitely a recommendation we re going to make, but there are other things you need to consider that are at least as important as the incentives, I followed. Like what? asked the president. Well, as you know, many of your sales forces call on the same customers, like advertising agencies and large corporations. It would be very dangerous to promote the cross-selling of your products without first putting in place some basic account management processes to coordinate the effort across those large customers. You also need to deploy additional management processes to help resolve any turf wars that erupt once three or four salespeople are motivated to sell the same products to the same customer. In fact, you might even rethink your salespeople s account assignments. If not, you are going to have some very annoyed customers, and even worse, your savvy customers will pit your salespeople against one another to drive down your prices. Without some new processes and metrics to manage this change, you could do more harm than good with new comp plans. Yeah, we will probably want to think about that sometime, said the excited President, but we first need to put the right incentives in place. Even as we sit here, we re losing revenue. Well, again, I replied, I would caution you against putting new compensation plans in place without any means to monitor and manage the problematic behavior that will commence on the very first day the new incentives are in place. Yes, I hear what you re saying, Jason. So how long will it take to get the new compensation plans designed and implemented? Can we get it done by the beginning of the year? This was one of many similar conversations I have had over the years. I recount it not because of the president s over-reliance on compensation as the single lever to govern sales performance I recount it because of his total lack of interest in the processes and metrics that could have helped him proactively manage the change. If there is one common trait across all the sales forces I have seen make remarkable improvements in performance, it is sales management rigor... rigor that begins with formal sales processes and insightful metrics. As I sat in Manhattan, I was reminded of another client I had worked with several years prior a Copyright 2010 Vantage Point Performance, Inc. 6

7 distributor who was also suffering flat revenues and profits. We had done some analysis and discovered that what little profit they had was concentrated in their biggest customers. Consequently, we recommended that they focus their sales force on protecting and growing those accounts. In this case, management agreed with our recommendation to redesign the compensation plans and implement new account management processes and metrics. When we returned 12 months later to check in on their progress, here is how the conversation went: So how have things gone since you made the changes last year? we asked. Is the sales force still committed to using the account plans and reporting tools that we developed for you? They re doing pretty well, the CEO reported. Right now only 8% of our locations have totally rejected the account management tool. 39% are complying with the process at a basic level, and the other 53% are using it as a central component of their sales and management activities. Also, the reporting mechanisms are now in place, so all our sales reps can track their performance at a detailed level. Great, we replied. How about performance? Have you measured the impact of the new processes and metrics? Well, revenues and profits from our largest customers, the ones under the account management program, are up 26% from last year. All of our other customers combined are basically flat, so I d say that the processes and reports have made a huge impact in helping us grow profitably. The primary difference between the media giant and the distributor was a commitment to change the way they sold. Not just how they motivated and rewarded their salespeople, but what happened in between motivation and reward the actual tasks of selling. The executives of the distributor also had a deep appreciation for the role that processes and metrics play in managing a sales force particularly in managing change. By providing clear guidance on the behaviors that they expected and then measuring those behaviors and associated outcomes, they were able to lead their sales force through a very dramatic change. The Transformation at Hand The profession of sales management is currently undergoing a transformation that will take it from the media company s mindset to that of the distributor. It is a transformation that has already taken place in other corporate functions such as operations and finance, where they chose to abandon artistic management and embrace management science that enables them to lead their organizations with confidence. Under the banner of Sales 2.0 or other such labels, there is a nearly ubiquitous sentiment that sales is on the verge of taking its organizational rigor to a higher level. But there are still some missing pieces in the sales management puzzle. As our stories illustrate, the biggest missing piece we perceive is the lack of insightful performance metrics that senior executives can use to pinpoint problems and proactively affect change. Over the past decade or so, information systems have vastly improved the measurement and reporting capabilities within the sales function. However, increased access to data doesn t seem to have been accompanied by a corresponding increase in control over sales performance. To skillfully use the data at their fingertips, executives desperately need a clear understanding of: 1) Which metrics are most meaningful for their particular sales force 2) How they can use those metrics to proactively influence the behaviors that drive sales performance If sales leaders had the answers to just these two questions, they could very quickly take their sales forces to that higher level of discipline and control. These questions became our point of departure for a very insightful study of the metrics that are used to manage leading sales organizations. Based on the outcomes of this research, we believe that we can now provide the answers to these two essential questions. Copyright 2010 Vantage Point Performance, Inc. 7

8 What We Learned about Sales Metrics Can You Actually Manage that Metric? As we mentioned above, we received 174 sales metrics from 17 different organizations. The first observation we had in reviewing the various sets of sales force measurements was that each company had categorized their metrics in very different ways. Though there were many metrics in common across the responses (% of Reps Attaining Quota, % Cross- Selling of Products, $ Spent on Training, etc.), there was little commonality in the way the measurements were organized. It was also unclear that any company had a taxonomy that was superior to the others. In fact, their attempts to categorize the metrics were baffling at times. For instance, one company had divided their metrics into Internal and External measurements, but they had two metrics that were in both columns. Another had organized theirs into buckets of Revenue, Cost, and Salesperson metrics, though the Salesperson measurements included measures of both Revenue and Cost per Sales Rep. Yet another provided a laundry list of more than a dozen metrics arranged in no discernable order. In the end, the metrics were organized (or not) in as many different ways as there were respondents, yet none of the methods was particularly intuitive or readily understandable. It s quite possible that the seemingly random categories were not random at all. Perhaps the metrics were arranged in a particular fashion because of internal reporting requirements or even because of the information systems from which they were extracted. Regardless, the categories were not very useful for our purpose, which was to understand how sales leaders can use key metrics to manage their sales forces. Frustrated by the lack of order that the survey respondents had provided, we decided to put all 174 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 each metric? That is, how much control does a sales manager have to directly affect that specific metric? An example of a manageable metric might be 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 number. An example of an unmanageable metric might be Revenue per Rep. No sales manager can simply command a salesperson to have more revenue (though many have tried). There are many independent factors that affect a salesperson s revenue, so it therefore cannot be directly managed by a sales leader. Using this one question as the basis for our undertaking, we soon discovered three distinct levels of manageability into which nearly all of the metrics fell. Highly Manageable Metrics: SALES PROCESSES All of the metrics that were deemed directly manageable were related to salesperson or sales manager activities. These activities (and the larger processes to which they belong) can be managed through unilateral decisions of a sales manager. For example, a sales manager should be able to decide and direct that salespeople prepare account plans for their major customers. 2 If so, then these are the only 2 Within this category of metrics, we concluded that a sales manager could either affect the metric themselves or instruct the salesperson to behave differently, which would in turn affect the metric. Of course, a manager s telling a salesperson to do something is clearly distinct from that salesperson s willingness to actually do it. However, we assume that good managers do have influence over their salespeople s activities, which is after all their role. Copyright 2010 Vantage Point Performance, Inc. 8

9 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 sales manager. Sample Sales Process Metrics: # of Calls % of Account Plans Completed Hours of Training per Rep Hours of Coaching per Rep % of Reps Using CRM Indirectly Manageable Metrics: SALES OBJECTIVES Many of the metrics we observed were measures of success in achieving specific selling goals or objectives. These are not unilateral decisions that can be directed by a manager they require some level of agreement by customers or employees. These can be influenced only indirectly by managing the preceding activities in the Sales Process level that lead to success with the stated sales objectives. For example, a sales manager cannot direct a customer to hand over a higher Share-of-Wallet (a Sales Objective), but they can direct their salespeople to increase their account planning activities (a Sales Process) which should ultimately affect the Share-of-Wallet they receive from their customers. Sample Sales Objective Metrics: % Customer Retention % Sales Calls Advancing Salesperson Skill Level # of Newly Acquired Customers % New vs. Existing Products Sold Unmanageable Metrics BUSINESS RESULTS Our final category of metrics we observed, Business Results, included very high-level outcomes often at the enterprise level. Business Results have no direct relationship to salesperson activities or processes and cannot be managed. They can only be influenced by achieving certain intermediary Sales Objectives that would lead to achieving the Business Result. For example, a sales manager cannot in any way directly affect Market Share (a Business Result), but an increase in customer Share-of-Wallet (a Sales Objective) should lead to the overall result of increased Market Share. % of Metrics Cited Sample Business Result Metrics: Revenue Attainment Market Share Size/Shape/Length of the Sales Pipeline Profitability Customer Satisfaction. The fact that Sales Objectives and Business Results are not highly manageable should not imply that they are unimportant. In fact, the respondents in our survey weighted all three fairly evenly, and we believe that collecting metrics at all levels is critical to managing any sales effort. However, sales leadership should have a clear appreciation that the nature of the three types of metrics is quite different, and they should be used to answer very different questions. Sales Process metrics have very high value in managing a sales force, as we have discussed. In fact, these are the only leading indicators of sales success that the proper sales processes are being executed properly. For front-line sales managers, these should be the primary pieces of feedback about the ongoing performance of their salespeople. 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% The Manageability of Sampled Sales Force Metrics Business Results Multi-dimensional outcomes that cannot be managed Revenue Customer Satisfaction Quota Achievement Cost-of-Sale Volume Pipeline Size Sales Cycle Length Pipeline Shape Market Share Sales Objectives Require agreement and can be managed only indirectly Call Outcomes Segment of Customer New/Existing Customers Skill Level Ramp-Up Time Deal Size Sales Force Turnover Share-of-Wallet Territory Coverage Up/Cross-Selling Customer Retention New/Existing Product Sales Processes Individual decisions that are highly manageable Tool Usage Call Volume Coaching IT Investment Account Planning Call Type Number of Accounts Time Allocation Prospect Type Process Usage Training Investment Training Type Prevalence of Different Sales Metrics 38% 36% 26% Results Objectives Processes N=174 Copyright 2010 Vantage Point Performance, Inc. 9

10 Sales Objective metrics have very high value in diagnosing problems and planning future activities. In most companies, the setting of Sales Objectives is a strategic decision that should be made in collaboration with marketing, finance, and other functions that also have a say in how the company goes to market with its products and services. Business Result metrics have very high value in reporting. Again, these are commonly enterpriselevel measurements that gauge the overall health and success of an entire company. These must be monitored (and they are) with great attention, though they have no active role in management beyond measuring success and providing guidance on how the preceding Sales Objectives might need to be changed. A Word about Managing the Pipeline Many readers will see Sales Pipeline metrics in the Unmanageable category of Business Results and immediately raise an eyebrow. We too fell victim to the established notion that a sales pipeline can be managed. But extended consideration led us to conclude that a pipeline report is in essence a probability weighted financial statement. Projected revenue is no more manageable than historical revenue it is just a forward looking Business Result. However, analyzing the size, shape, and length of the sales pipeline is a powerful management tool. It provides insight into how Sales Objectives need to be shifted (acquire bigger customers, increase territory coverage, etc.), which in turn enables sales managers to direct activities at the Sales Process level (target bigger customers, increase the number of sales calls, etc.) which will ultimately affect the sales pipeline. We are not disputing the value of analyzing the sales pipeline, simply the ability to directly manage it. Sales Metrics and their Value to These are the outcomes of multiple objectives, and they cannot be managed whatsoever These are objectives that can be influenced, but only by managing their preceding Processes These are salesperson and manager activities that we can proactively direct and manage Business Results Metrics with high value in Reporting Sales Objectives Metrics with high value in Diagnosis and Planning Sales Processes Metrics with high value in Managing Copyright 2010 Vantage Point Performance, Inc. 10

11 Check Point: Sales Metrics Let us restate the conclusions that we have drawn so far from our analysis of sales metrics: When measured by how manageable they are, there are three levels of sales force metrics: o Sales Process metrics, which are highly manageable o Sales Objective metrics, which are indirectly manageable through the management of Sales Processes o Business Result metrics, which are not manageable whatsoever they are only influenced by achieving certain Sales Objectives There is a linear causal relationship between the levels o Sales Processes Sales Objectives Business Results A well managed sales force will collect metrics at all three levels each used for a different purpose: o Metrics on Sales Processes to help manage the sales force o Metrics on Sales Objectives to help the company diagnose and plan o Metrics on Business Results to help the company track overall success At this point in our analysis, we had reached some very insightful conclusions about the types and uses of sales force metrics. However, we had not yet accomplished our objectives of determining which metrics are most meaningful for an individual sales leader and how those metrics can be used to drive predictable improvement. To understand these issues, we would have to dive deeper into each type of metric. Copyright 2010 Vantage Point Performance, Inc. 11

12 What We Learned about Sales Processes commercial time management methodologies, but in practice these activities most often take the form of weekly meetings between a salesperson and their manager to schedule and discuss upcoming calls and meetings. Success here is typically measured by the number or percentage of tasks that are completed. During our careers, we have heard the term sales process used in as many ways as one can imagine. Do you have a formal sales process? we will ask. The replies always come, Oh yes, we use this process, or Oh yes, we use that process, or Oh yes, we use a combination of this and that. Sales process, it seems, means something different to everyone. The obvious conclusion is that there is no universal sales process. Sales forces are, in fact, a collection of distinct processes each working to accomplish its own end. In truth, we reached this conclusion many years ago, but our analysis and consideration of the above-mentioned metrics helped us to put a finer point on our thoughts. Most specifically: 1. How many sales processes actually exist in the world? 2. How do you know which (if any) of the processes are needed in your sales force? Second is the Call process. This process is intended to help salespeople plan for specific customer interactions their desired outcomes for the call, questions they might ask, objections they might expect, products they might propose, etc. The primary measure of success here is to achieve the desired call outcome, though process compliance can also be tracked by the manager like every other process on this list. If we string together a series of calls in pursuit of a single sale, then you have an opportunity. An Opportunity process helps salespeople plan and execute thoughtful approaches to long, complex sales. Often confused with pipeline management, this process is not an analytic exercise to pinpoint failures in a collection of ongoing opportunities this is an assessment and planning effort to deliberately win an individual sales pursuit. Success is measured by how successfully the plan is executed, as well as the eventual outcome of the pursuit. How Many Sales Processes Are There? Distribution of Sales Process Metrics After examining all of the metrics we had labeled as Sales Process measures and asking ourselves which activities they intended to measure, we were able to identify six distinct selling processes that encompassed all of the process metrics in our research. Listed in the table below are the individual processes along with a brief statement of purpose and a sample metrics for each. 30% 25% 20% 15% 10% 5% 17% 26% 22% 13% 13% 9% First we have a Time process. 3 This is a set of activities that helps a salesperson to plan and prioritize their tasks for a given period of time most commonly a week. There are many 0% Time Mgmt Call Mgmt Opportunity Mgmt Account Mgmt Territory Mgmt Sales Mgmt* 3 You will note that we have elected to use common terminology for these processes rather than try to trademark awkward new terms. Hopefully this will make them easier to grasp and will not confuse you with meanings that you might already have associated with the terms. Copyright 2010 Vantage Point Performance, Inc. 12

13 If there are multiple opportunities over time with a single customer, then we have an account. An Account process helps a salesperson assess their position within an account and coordinate among internal and customer resources to grow the long-term value of that customer. Success here is typically judged by retaining and growing the account, as well as achieving various other selling objectives. If we are assigned a group of accounts or prospects, then we have a territory. Note that a territory does not necessarily need to be geographically defined a salesperson could be assigned accounts that are chosen in many ways (industry, customer segment, etc.). Regardless, a Territory process helps salespeople and their managers decide how to allocate their time across a large group of customers. Success here could be measured by how many accounts each rep is assigned, whether the accounts comprise the desired mix of customer types, and how well the salesperson performs at covering the accounts with the intended frequency. Finally, there is a Sales Force process. This process has the largest scope of the six, since it is very diverse by nature. Sales management activities include recruiting, selecting, training, motivating, coaching, rewarding, and providing tools that enable the sales force s performance. This process is typically spread across several people and departments, including sales, HR, and finance. Typical metrics in this case track the expenditure of resources on training programs, information technology, recruiting, coaching, and other sales management activities. Most of the companies to whom we have consulted over the years have used some form of sales process, whether purchased off-the-shelf from a process vendor, developed internally by their own staff, or designed in collaboration with outside advisors. However, the scopes of their process would not have fit neatly into one of these six categories. In fact, it is our experience that most companies with formal sales processes have assembled a mish-mash of activities and tools that incorporate elements from each of these processes. This is not inherently a problem, if the mélange of processes in fact fits the way their sales force operates. Frequently, though, companies have selected their formal sales process in one of two less satisfying ways. Either they fell victim to a good salesperson from one of the many process vendors, or they chose to recycle a methodology that a sales leader had used at a previous company. In our opinion, this is doing a disservice to the organization. The decision to implement one or more of the above processes should be very deliberate and driven by the Sales Process Purpose Sample Metrics 1. Time 2. Call 3. Opportunity 4. Account 5. Territory 6. Sales Force Identify, prioritize, plan, and track key tasks Create successful outcomes to specific customer interactions Initiate, qualify, advance, and close multistage sales Maximize long term value of select customers Deploy optimum levels of resources against various types of customers and prospects Staff, motivate, train, and equip the sales force for success # of Tasks Completed in a Time Period % Time Allocated across Tasks % of Reps Complying with Process % of Successful Call Outcomes % of Reps Complying with Process % of Reps Using Tools % of Objectives Met % of Reps Complying with Process % of Reps Using Tools % of Objectives Met # of Accounts per Rep % Prospects vs. Active Customers % of Time Spent Coaching Hrs of Training per FTE $ on IT Systems per FTE Span of Control Combined Metrics of Direct Reports Copyright 2010 Vantage Point Performance, Inc. 13

14 sales force s unique needs. But in fairness to the many sales executives who have chosen somewhat misfit sales processes, there has been no real guidance as to which processes are relevant for which types of sales forces. Vendors sell what they have, and executives buy what feels right. Therefore, one of the outcomes we hoped for our research was to provide some such guidance on the selection of a suitable sales process. Otherwise, it would be impossible to contend that the metrics being used to manage the sales force are truly relevant or useful. This leads us back to the fundamental question that precedes good measurement and management: How do we know which sales processes are right for a given sales force? Which Sales Processes Do I Need? Looking at the list of six sales processes and their associated metrics, it was immediately obvious to us that not every sales force would need to put in place (nor could they endure) all of the sales processes and metrics. There must be a logical way to identify which sales processes are most critical for a particular sales force. Our first thought was that company demographics would inform which processes would be important for its particular sales force. For instance, if a company s profits are highly concentrated in a handful of accounts, then that company must need Account processes. Or if a company s sales force is arranged geographically, then they must need Territory processes. However, when we reflected on the work we had done with past clients and the previous research we had conducted into the best practices of world-class sales forces, we realized that this approach was too simplistic. We needed a more focused view to select and implement the appropriate sales processes. We determined that sales processes should never be selected at a company-wide level, though they so frequently are. The need for a specific sales process is determined by the nature of each distinctive selling role. That is, companies don t need Account processes only those people who manage major accounts need them. Companies don t need Territory processes only those salespeople who must selectively call on customers need them. Sales process selection is therefore not a decision to be made by examining the enterprise it Sales Processes for All! No Wait We were once working with a very large consulting firm when a major sales process vendor remarkably sold the firm a suite of licenses to their Account, Opportunity, and Call templates (Note: We were not consulted on the decision). The vendor and the firm s management agreed that all consultants should be trained in each of the three processes, without any consideration to the different selling (and non selling) roles within the organization. It wasn t until the vendor revealed the multi million dollar price tag for several thousand licenses that the management team began to scrutinize who actually managed accounts, pursued opportunities, or made sales calls. Ultimately, the number of licenses was pared back so far that only a handful of people in the firm could actually use the processes rendering the entire exercise basically useless. Avoid this fate by being exceptionally deliberate in assessing which types of selling roles you have in your organization and determining which processes, tools, and metrics are needed to manage them successfully. is a decision best made by examining the role. Below we provide rule-of-thumb guidelines for when a particular process is appropriate for a particular role. Note that it is not the title of the role that indicates which processes are important. For example, just because a salesperson has the title Sales Manger does not mean that they require a Sales process. Nor does a salesperson whose business card reads Account Manager necessarily require an Account process. You must examine the nature of their selling activities to determine which processes are applicable, or even critical, to the execution, measurement, and management of that selling role. It is absolutely crucial that sales leadership understands the six types of sales processes and their unique applications to distinct selling roles. We have often seen sales processes implemented for the wrong (or unknown) reasons with very predictable outcomes. First, the processes are ignored by the sales force. This can result from processes that are Copyright 2010 Vantage Point Performance, Inc. 14

15 Sales Process 1. Time 2. Call 3. Opportunity 4. Account 5. Territory 6. Sales Force Applicability to a Selling Role There is high variability in the salesperson s daily activities The salesperson has an efficiency driven role: More Effort = More Sales 4 The salesperson has a low to moderate volume of highly varied customer interactions The salesperson is targeting customers with complex buying processes (numerous buying stages and/or multiple buyers with varying buying needs) The salesperson is pursuing opportunities over time with the same customer There is an economic justification for an added layer of effort The salesperson makes proactive customer contact and cannot service all potential customers The salesperson or manager needs to prioritize the selling effort and allocate it across different types of customers The manager has authority to influence or direct decisions in the hiring, training, measuring, coaching, motivating, rewarding, and enabling of the sales force over-engineered or badly designed, but it is just as often because the processes being implemented are not relevant for the selling roles onto which they are being inflicted. Second, sales management can spend an insane amount of time trying to enforce the processes and explaining to senior management why they are not realizing the promised ROI on the newly implemented processes and tools. The investment required to design and deploy sales processes is not trivial, and deploying the wrong ones only compounds the costs. In fact, it might be better to have no formal processes than to implement the wrong sales processes. Using Processes to Manage and Coach We strongly believe that using sales processes and metrics to manage your sales force is the only way to drive predictable execution. In fact, the processes should be the framework for most, if not all, of your sales managers coaching activities. Depending on their selling role, your salespeople should be using relevant sales processes to plan, execute, and track their day-to-day selling tasks. Sales managers should first ensure that their salespeople are using the processes appropriately and measure salesperson compliance. Managers can then use the processes as a means to coach their salespeople, helping them to plan and debrief their selling activities, while developing the salespeople s ability to achieve successful outcomes on their own. Using Processes and Metrics to Manage Your Sales Force Coach to the Process Account Plan Measure Compliance and Success Manager Call Plan Opp ty Plan Sales Role 1 Sales Role 2 Sales Role 3 4 Sales managers must be exceedingly careful with the assumption that more effort on a salesperson s part will result in more sales. Most sales forces are managed with this mentality, but in reality the percentage of roles where this holds true is shrinking as more and more salespeople become valueadded consultants rather than feet-on-the-street marketing impressions. Increasingly, it is more important to work smart than to work hard. Copyright 2010 Vantage Point Performance, Inc. 15

16 Check Point: Sales Processes Let us once more pause to review what our research has revealed about Sales Processes: There are six discrete Sales Processes: 1. Time 2. Call 3. Opportunity 4. Account 5. Territory 6. Sales Force Each of these processes has its own purpose, metrics, and applicability Which Sales Processes you need in your sales force is determined not by any characteristic of your company or sales force, but by the nature of each individual selling role To proactively manage your sales force: o Implement the right processes o Use the processes as your framework for coaching o Measure compliance and successful outcomes Finally in our analysis, we had begun to make some headway against our first research objective to understand which metrics are important for any given sales leader. While we had two more levels of metrics yet to explore Sales Objectives and Business Results we were now able to provide some guidance to sales executives. By examining the nature of the selling roles in your organization, you can identify the types of processes and accompanying metrics that will provide you with insight into the groundlevel activities of your sales force. Copyright 2010 Vantage Point Performance, Inc. 16

17 What We Learned about Sales Objectives increase the capacity of your sales force to cover more prospects and customers. We chose to call these Sales Objectives because they are goals toward which selling effort is directed. They are outcomes of the effort, and consequently they cannot be managed or directed with the same level of control as selling activities or processes. They can be managed only indirectly at the Process level. For example, a Sales Objective might be to increase the skill level of your sales force. This could be accomplished through several activities, such as increasing the amount of sales training or recruiting a higher caliber of salespeople. Another Sales Objective might be to increase your number of new accounts, which could be achieved by putting greater effort into cold calling or by visiting more prospects. You cannot direct a salesperson to be more skilled or to have more new accounts, but you can set an Objective and manage the related activities. Again, managing Sales Processes leads to achieving Sales Objectives. Metrics of Salesperson Capability (which could also be labeled Sales Force Effectiveness) tell you how successfully that effort is being applied. That is, if your salespeople have eight hours of Capacity each day to spend with prospects and customers, how successful are they during those customer interactions? Salespeople are generally considered to be capable if they can successfully advance opportunities, win deals, or accomplish other desired outcomes of their customer-facing activities. (Note that Salesperson Capability is not the same as salesperson skill. Capability includes the skill of the salesperson, no doubt, but it is also a reflection of selling tools, motivation, and other components that affect the effectiveness of a salesperson.) The next two Sales Objectives are elements of a sound marketing strategy. Metrics of Product Focus report whether a sales force is selling the products and services that are deemed optimal to the company. These could be products with higher profitability or products with some strategic value, such as a new line of products. How Many Sales Objectives Are There? Just as we used our collection of Sales Process metrics to isolate distinct processes, so we used our Sales Objective metrics to discern five categories of Objectives into which most of the measures fell. The Objectives are listed below, along with a brief description of each one s purpose and sample metrics from our research. 60% 50% 40% Distribution of Sales Objectives Metrics 51% The first two Sales Objectives basically provide the math for overall sales force productivity. Metrics of Sales Force Capacity (which could also be labeled Sales Force Efficiency) tell you how much effort you are getting from your sales force. By increasing the number of salespeople you have in the field or the percentage of their work day that is productive, you can 30% 20% 10% 0% 3% Sales Force Capacity 19% Salesperson Capability 14% Product Focus Customer Focus 14% Human Capital Copyright 2010 Vantage Point Performance, Inc. 17

18 Sales Objective Purpose Sample Metrics Sales Force Capacity Salesperson Capability Product Focus Customer Focus Human Capital Ensure there is enough total selling effort to cover all desired customers/prospects Ensure that salespeople are using their capacity effectively during their individual customer interactions Ensure the sales force is selling the products and service that the company wants to sell Ensure the sales force is obtaining, retaining, and growing the customers that the company wants to have Ensure a skilled, well equipped, satisfied sales force % Productive Time for Reps % of Market Opportunity Covered % Vacant Positions % of Calls Advanced % of Deals Won # of Deals with Discounts % of New vs. Existing Products % of Cross Selling/Up Selling Average Deal Size % of New vs. Existing Customers % Customer Retention % Share of Wallet Average Skill Level of Reps % Sales Force Turnover # Months Ramp Up Time Metrics of Customer Focus reveal whether the sales force is attracting, retaining, and growing the company s targeted customers. Examples could be customers that are either more profitable or customers that are somehow strategically important, like those in a new market or geography. Focusing on selling the right products to the right customers is an essential part of any company s go-to-market strategy or at least it should be. These metrics allow you to measure success in achieving those Objectives. The final type of Sales Objective encompasses key measures of a sales force s Human Capital. This is a bit of a catch-all term, particularly in human resources circles, but we use it here specifically because it does capture a broad range of issues. All of the hiring, training, motivating, rewarding, tooling, and coaching that takes place in the Sales Force process show up here as a more skilled, more potent, and more engaged workforce. A problem with Human Capital measurements has always been the difficulty of quantifying success, but the metrics that we observed in our research such as Percentage of Turnover, Number of Months Ramp- Up Time, and others are easily quantifiable and capture quite well the Outcomes of the underlying activities. As we looked at the distribution of metrics in the survey, we found that the majority of the Sales Objectives were focused on the customer. This resulted from an overwhelming number of measurements geared toward acquiring, retaining, and increasing the value of customers. Of course, we cannot argue with the dominance of Customer Focus metrics in our research above all, sales is about the customer. However, we were surprised with the almost insignificant number of metrics focused on Sales Force Capacity. We read a study several years ago that asserted most sales forces have too few salespeople to accomplish their stated market objectives. We found that observation thoughtprovoking at the time, and our research would lend it more credence. Whether or not most sales forces are actually operating below their ideal capacity, we can t know for sure. But we would wager fairly confidently that those sales forces don t know either. This is an amazingly powerful category of metrics to collect, since it allows sales leaders to identify uncovered opportunity and to justify hiring additional sales reps. If you feel that your sales force is underrepresented in your target markets, go get these numbers. A Sales Treasure Map? Recall that one of our first observations about Sales Objectives was that they cannot be directly managed. We concluded that Sales Objectives could only be influenced by directing specific activities within the Copyright 2010 Vantage Point Performance, Inc. 18

19 more manageable Sales Processes. Shortly after we identified the five Sales Objectives, we began to look for some way to relate the Objectives back to the Processes in a systemic fashion. We knew intuitively that account planning should lead to increased Share-of-Wallet and that increased training should lead to a higher Average Skill Level. But if we could not find a more rigorous relationship between the Processes and Objectives, then our system of management would begin to look more like a layer cake with sheets of steel separating the layers. Fortunately, as we stared at the metrics day after day, the separation between the layers began to disappear. We started to cut slices in the metrics a few at a time until we eventually had two layers of metrics with clearly-defined relationships. We found that the Sales Processes do have direct causal relationships with the Sales Objectives. More specifically, certain Sales Processes influence certain Sales Objectives. Our finding means that if you have a Sales Objective, say to sell new products, you now know exactly what to do to achieve that Objective. You track backward to the Processes that have an impact on that Objective, and then you manage the activities within that process. See the Process- Objective map below for more detail. Suppose that you set an Objective for the year to improve your Customer Retention Rate. You are trying to affect a Customer Focus metric, so there are four Sales Processes with manageable activities that can influence such an outcome. First, the Sales Force tools of compensation and coaching could be used to shift the focus of your reps toward servicing existing customers. Second, you could use your Territory process to allocate more time to those customers. Third, you could put Account processes in place, if they don t already exist, to help your salespeople become more intimate with key customer issues. If you have an Opportunity process in place, you could alter the qualification guidelines to limit the number of new customer pursuits. And of course, your sales managers would measure each processes to track that it is being followed and successfully executed in the field. Or, suppose that you set an Objective to increase the Percentage of Proposals Won. If your salespeople are in charge of the proposal generation and presentation activities, then this would be a Salesperson Capability metric. Looking at the chart, there are four Sales Processes that could potentially affect his Objective. First, there are Sales Force activities you could select, such as providing proposal templates or training the salespeople on how to craft a winning document. Second, you might put an action item in your Account or Opportunity Certain Sales Processes Drive Specific Sales Objectives Sales Force Capacity Salesperson Capability Product Focus Customer Focus Human Capital Sales Force Mgmt Territory Mgmt Account Mgmt Opportunity Mgmt Call Mgmt Time Mgmt Copyright 2010 Vantage Point Performance, Inc. 19

20 Shouldn t the Metrics be Mutually Exclusive? One might look at these five Sales Objectives and notice that many of them could relate to one another. For instance, increasing the Average Skill Level of the sales force could improve its Percentage of Deals Won. In fact, you would hope so. Or pursuing products with a larger Average Deal Size could have the opposite effect of decreasing the Percentage of Deals Won, though you would hope not. The fact is that many Sales Objectives could influence others, which is fine. The point of separating the Objectives from the Processes was not to create a level of mutually exclusive metrics, it was to emphasize that Objectives cannot be managed directly. Though Average Skill Level may influence the Percentage of Deals Won, you cannot directly manage either of them. You must dip down into the Sales Processes to find a manageable activity that will drive improvement in the level of skills (like more training) or even an activity that will improve the win rate (like better call planning). Remember that our goal is to find ways to measure and manage our salespeople toward Sales Outcomes, not to devise an overly complex system of metrics. processes to have each proposal reviewed by all key stakeholders prior to its submission. Or perhaps you would place action items in your Call processes to ensure that a manager is involved in the planning of any meeting where a proposal is presented. Again, measuring and managing all the while. As you can see from the diagram, Sales processes are relevant to every category of Sales Objective, since training, coaching, compensation, and other tools can have an effect on any Outcome. However, Account processes will not help an organization increase its Sales Force Capacity. Territory processes cannot be used to influence metrics of Salesperson Capability or Product Focus. Depending on the selling roles in your sales force and consequently the Sales Processes that you have in place, there are different but predictable ways to manage your sales force so that specific Sales Objectives can be achieved. Of course, management s judgment must be used in all practical cases to identify the best course of action to influence a given Sales Objective. But these Process-Objective relationships demonstrated here are useful departure points for good managerial decision-making. The Missing Link in Sales? By establishing a causal link between Sales Processes and Sales Objectives, we gained insight into what we think has been the missing link in sales management: The ability to set specific Sales Objectives and then manage day-to-day activities to predictably attain those Objectives At the risk of sounding cynical, the annual cycle of sales management has looked somewhat like this to us: Each year new Sales Objectives are announced for example, let s say that this year a new product line is being launched. At the annual sales kickoff meeting, a new compensation plan is implemented with juicy, attention-grabbing incentives for the sales force to sell the new products. Hunters and farmers 5 alike are highly motivated to sell the new products. But will they be highly managed? At the end of each quarter, the sales numbers for the new product line are reported, and they are not good. is very concerned and continues to reinforce the lucrative compensation for selling the new products perhaps even throwing in a special incentive to kick-start the sales. Nothing. At the end of the year, sales for the new product line have been lackluster. What else could have been done? Here is a way this might have happened differently in a world of highly managed Sales Processes that are linked to Sales Objectives: The new Sales Objective comes down from above sell this new product line. The enlightened sales managers of course announce the new compensation plan, but they will not take the risk of simply managing by incentive. They know how important it is for the company to achieve this Objective, and they will ensure that it is attained by managing their salespeople aggressively. First, they provide training on the new product 5 In classical sales terminology, hunters are salespeople who pursue new customers, while farmers are sellers who nurture and grow existing accounts Copyright 2010 Vantage Point Performance, Inc. 20

21 line both how to sell it and why prospects will want to buy it. Training is a Sales Force activity that is controllable and will lead to a sales force s increased ability to sell the product. Second, since the farmers role is to maximize the long-term value of the company s most important customers, they would already have in place formal Account processes. The sales managers would direct the farmers to include in every account plan the action item of introducing the new product line to their accounts during the first quarter of the year. Then the managers coach persistently to ensure that the action items are completed. new product. You first identify which Sales Processes can influence the Objective, like an Account process to help sell the product to existing customers. Next, you embed the Sales Objectives in the planning activities of that Sales Process, then measure and manage the Processes persistently to achieve the Objective. Processes provide you with a mechanism to translate sales strategies into selling activities. Third, since the hunters role is to pursue large and complex sales, they already would have in place formal Opportunity processes. The sales managers would then direct the hunters to include in every opportunity management plan the qualifying criteria of whether the prospect might be a candidate for the new product line. If so, the new product must be included in the onsite demonstration, and the managers would coach persistently to ensure that the new product demos took place. In our new scenario, the sales force is still motivated to sell the new product line because of their new incentive compensation. But in addition, they have been trained on how to sell the products, and they have formal plans to introduce the new product line to each of their accounts and prospects. And, the sales managers are coaching toward the Sales Objective and measuring the completion of the related tasks as outlined in the Account and Opportunity processes. The clear and linear connection between Sales Processes and Sales Objective is the missing link that enables systemic and proactive sales management for those who want it. Using Processes to Achieve Sales Objectives Embed the Objective in the Processes and Coach New Sales Objective Measure Compliance and Success Manager Using Processes to Achieve Sales Objectives Once you have the right Sales Processes in place for each of your selling roles, you then have a means to adapt your selling effort in response to new Sales Objectives. Suppose you want to achieve a new Sales Objective, such as increasing the sales of a Account Plan Call Plan Opp ty Plan Sales Role 1 Sales Role 2 Sales Role 3 Embed Objectives Here Copyright 2010 Vantage Point Performance, Inc. 21

22 Check Point: Sales Objectives Let us again pause to review what we have learned about Sales Objectives: There are five types of Sales Objectives: 1. Sales Force Capacity 2. Salesperson Capability 3. Product Focus 4. Customer Focus 5. Human Capital Each of these Objectives has its own purpose and associated metrics The metrics within each type of Objective are influenced by specific Sales Processes that have a causal relationship with the Objectives To achieve a specific Sales Objective, you must: 1. Identify which type of Sales Objective you want to change 2. Set target metrics for your Objective 3. Identify which Sales Processes can influence the Objective 4. Embed the Sales Objectives in the planning activities of those Sales Processes 5. Measure and manage the Processes persistently to achieve the desired Objectives At this point in our research and analysis, we felt that we had essentially developed a new management system that was both highly structured and highly flexible. By embedding Sales Objectives in the day-to-day Processes of the salespeople and managers, executives now have a means to set strategic direction for the sales force and know with confidence that the first-line sales managers can both communicate the strategy and measure its successful implementation. The only task remaining was to link Sales Objectives to the final category of sales metrics Business Results. Copyright 2010 Vantage Point Performance, Inc. 22

23 What We Learned about Business Results At the top of our hierarchy of sales force metrics is Business Results. As the highest order of metrics, they are influenced by all of the Sales Processes and Sales Objectives that lie below. In fact, they are such aggregate measures of business performance that they are influenced by many factors outside of sales control. Regardless, sales is undoubtedly the function that has the greatest sway over these metrics particularly in business-to-business markets. As with Sales Processes and Sales Objectives, we analyzed the metrics that comprised Business Results and found that there were several categories into which the metrics tended to cluster. In this case, we found five types of Business Results. As you can see from the chart below, nearly half of all the metrics reported were Financial in nature. These were primarily measures of revenue, though there were several cost and profit measurements cited as well. Included in this group was also quota attainment, which we characterize as a metric focused on meeting a targeted Financial result, whether revenue, profit, or unit volume. ever-popular measures of Sales Pipeline. These measurements capture the size, shape, and length of the active opportunities within a sales force. Again, in our opinion a Sales Pipeline report is effectively a forward-looking, probability-weighted financial statement. In fact, we originally included these metrics in the category with other Financial measures, but we appreciate that there is a distinction in most people s minds, and we thought it instructive to set them apart in this analysis. Employee Satisfaction was also popular, though we have already mentioned our opinion on measuring general satisfaction. Interestingly, some of these metrics were narrowly focused in specific areas, such as Satisfaction with Information Technology. In line with our comments about Customer Satisfaction, the more targeted the measure, the more comfort we have with it. To us the biggest surprise was the nearly insignificant mention of Market Share measurements. At least in our experience, Market Share is a metric that many sales forces track - not only for general business reporting, but also for use in the incentive compensation plans of individual salespeople. We are not necessarily advocating the inclusion of Market Share in salespeople s incentive plans, but it underscores the importance with which some companies and industries view it. Interestingly, Customer Satisfaction was the second most commonly mentioned type of metric. While we generally put very low value on measures of general satisfaction, this could in fact be a fairly meaningful metric for sales roles that include a large post-sale or customer service component. If this type of metric is used to judge the sales force s performance, we hope that it is collected in a highly targeted fashion where the results can be tracked to individual salespeople or teams. Otherwise, it can be a very misleading indicator of performance. (Note: We do believe that timely and explicit customer feedback is critical to managing change it is just generalized levels of satisfaction that we find dubiously useful.) 60% 50% 40% 30% 20% 10% 0% 49% Distribution of Business Result Metrics 17% 19% Financial Sales Pipeline Customer Satisfaction 11% Employee Satisfaction 4% Market Share The third most cited Business Results were the Copyright 2010 Vantage Point Performance, Inc. 23

24 Business Result Definition Sample Metrics Financial Sales Pipeline Customers Satisfaction Employee Satisfaction Market Share An accounting related measure of cost, revenue, or profit Projected revenue or volume typically broken into several stages of the Opportunity process The customers perception of a company overall or of a specific aspect of the company s products, services, or relationship The employees perception of their employer overall or of a specific aspect of their job Percent of targeted opportunity that has been captured by the company $ Revenue $ Cost of Sale % Revenue Growth Rate $ Profit per FTE $ Total Pipeline Revenue Length (Days) of Sales Cycle $ in Each Stage of Sales Cycle % Satisfied or Dissatisfied Satisfaction Index % Satisfied or Dissatisfied IT Satisfaction Index % Market Share Got Roots? Unlike the previous two levels of sales metrics where we were able to simplify the management challenge by isolating clear cause-effect relationships between specific types of Processes and Objectives, Business Results are such broad measures that they defy such satisfying insight. To understand what levers need to be pushed or pulled to move metrics such as Revenue or Market Share, we find ourselves without much of a shortcut. In this case, we must fall back onto the traditional management exercise of conducting root cause analyses to understand what Sales Objectives will have the biggest impact on a selected Business Result. Financial Metrics Dissecting Financial metrics is an accounting exercise to a point. As shown in the chart below, Profit is comprised of Revenue and Costs. Revenue is furthermore comprised of Unit Volume and Unit Price. However, we quickly come to the point where our accounting definitions can take us no farther. We are forced to use our own analysis and judgment as to which Sales Objectives will have the greatest impact on our desired Financial metric. For example, if I decide that increasing sales Volume is my Financial metric of choice, then I have several possible Sales Objectives that I Sales Force Capacity could choose to help me achieve that Result. Depending on the situation and market dynamics, I might select to boost my Sales Force Capacity, which would enable my sales force to do more of what they re already doing. I might choose to increase my win rate by improving my Salesperson Capability. I could choose to offer new products which would require a shift in Product Focus. I could target new customers, which would entail reallocating my Customer Focus. And any of these options might require increasing skill level, which would affect my Human Capital Objectives. Linking Financial Metrics to Sales Objectives Volume Salesperson Capability Revenue Financial Metrics Price Profit Which Sales Objectives? Product Focus Cost Customer Focus Human Capital Copyright 2010 Vantage Point Performance, Inc. 24

25 Or say that I decide Price is the Financial lever I want to pull. I could attempt to limit the amount of discounting by my salespeople (if they have pricing authority), which would require an increase in Salesperson Capability. Or I could shift selling effort toward higher priced products, which would alter a Product Focus Objective. I could also pursue a segment of customer that I know to be less price sensitive, which would be a shift in Customer Focus. And again, any of these might require altering my Human Capital Objectives in some way. Linking Pipeline Metrics to Sales Objectives Measuring the Opportunity Process Sales Opportunity Process Milestones Step 1 Step 2 Step 3 Step 4 Step 5 Performance Metrics % % % % In short, changing a Financial metric requires some analysis to understand which Sales Objectives are most capable of moving the needle. Of course, once you choose your Sales Objective and set new target metrics, then you must look to your Sales Processes to determine what your sales managers must do differently in the field to achieve the Sales Objective target. (Note that Market Share, which is typically measured in Revenue or Volume would be evaluated in an identical fashion, so we will not examine it separately) Sales Pipeline Metrics 100% 75% Leads 50% 25% 0% 100% Allows you to identify points of failure... We are losing 25% of our leads in this step And here we are losing 35%! Step 1 Step 2 Step 3 Step 4 Step 5 And improve Salesperson Capability Improved performance at critical steps in the process Dissecting Sales Pipeline metrics is very similar to the analysis we would do for Financial metrics, since the metrics are also similar (primarily Revenue). The sales pipeline is simply forward-looking while actual revenue is historical. If you decide that your pipeline is too small, then you can explore the same options as boosting Revenue more capacity, higher capability, different products, different customers, or a rewired workforce. The one thing about Sales Pipeline measurements that differs from Financial metrics, though, is the level of detail with which you can do the analysis. Pipeline metrics break Revenue into smaller pieces, which align with different stages of the sales cycle. Rather than just looking at realized Revenue, you can (ideally) isolate where potential revenue is leaking from the selling effort. This is an incredibly powerful piece of analysis, if opportunities are tracked in the proper way. Understanding where the failure points are in your selling effort allows you to set Sales Objectives that improve Salesperson Capability at those critical points of failure. Then, of course, you can identify which Sales Processes (ostensibly Call ) Leads 75% 50% 25% 0% Step 1 Step 2 Step 3 Step 4 Step 5 will eliminate the failures and boost future Revenue. Customer and Employee Satisfaction Measures of satisfaction are perhaps the murkiest of all metrics. Foremost, the sources of satisfaction or dis-satisfaction are as varied as the number of interactions anyone might have with your company (inside or out), so pinpointing actionable opportunities for improvement can prove elusive. But more importantly, research shows that satisfaction is not a leading indicator of customer loyalty, despite the implication. In research conducted by HR Chally, more than 80% of customers who defected from their suppliers ranked that supplier as either Good or Very Good. 6 6 Howard Stevens, CEO, HR Chally Group, 2008 Copyright 2010 Vantage Point Performance, Inc. 25

26 Consequently, we put very little faith in the usefulness of these metrics. But if you must collect them for one reason or another, then again our guidance is to make them as specific as possible in the scope of their inquiry. Putting It All Together In sum, Business Result metrics are very high-level indicators of the health of a company, and they are influenced by a great number of things. To exert any influence over their improvement, you must invest the resources to analyze the root causes of poor performance and the true drivers of potential improvement. If done well, you will be able to isolate the Sales Objectives that will affect the Business Results, and then manage your sales force at the Process level to proactively affect change. A Word About Budgeting and Forecasting Budgeting and forecasting are critical business activities that are required to run any company particularly one whose profitability depends on closely matching its production capacity with its anticipated demand. However, they are typically lowvalue added activities for the sales force, and ones that consume a great deal of time and energy. Sales forces with well defined processes are able to produce less invasive and more accurate budgets and forecasts, because they are effectively embedded in their Opportunity, Account, and Territory activities. Most sales forces have some form of Opportunity management processes in place for the purposes of reporting pipeline forecasts. But for companies whose profitability is highly concentrated in a small number of customers, there should be key account managers who put informed revenue and volume goals in their account plans each year (or other reporting period). Alternatively, companies with a highly dispersed customer base should have territory managers who put considered revenue and volume goals in their territory plans. Frequently, these Territory and Account level forecasts are more accurate than those done at the Opportunity level. Therefore, there is an additional benefit to implementing and managing to good sales processes improved financial reporting. Putting It All Together Business Results Financial Metrics Pipeline Metrics Customer Satisfaction Employee Satisfaction Market Share 1. Identify the Results you want to achieve Sales Objectives Sales Force Capacity Salesperson Capability Product Focus Customer Focus Human Capital 2. Select Objectives that will lead to those Results Sales Processes Call Time Account Opportunity Sales Force Territory 3. Embed the Objectives in the relevant Processes, and manage the processes relentlessly Copyright 2010 Vantage Point Performance, Inc. 26

27 Check Point: Business Results One last interlude to review what we have learned about Business Results: We found five types of Business Results: 1. Financial 2. Sales Pipeline 3. Customer Satisfaction 4. Employee Satisfaction 5. Market Share Business Results are the highest level of metrics and are affected by many influencers To improve metrics of Business Results, you 1. Isolate the root cause of the problem or the key driver of improvement 2. Identify the Sales Objective that will most affect the desired metric 3. Manage the Sales Processes that will help you achieve the Objective At the conclusion of our analysis, we had identified three levels of sales force metrics and successfully organized them into a new system of management that will allow executives to select Business Results that they want to improve, identify which Sales Objectives will help them achieve their desired results, and embed those objectives in relevant Sales Processes that front line sales managers can then direct and measure. This top-down, metrics driven approach to sales management should provide executives with greater control, visibility, and confidence in their sales forces. Copyright 2010 Vantage Point Performance, Inc. 27

28 What We Know About Implementation We opened our paper with the story of a media conglomerate that had no formal sales processes or manageable performance metrics. Perhaps you find yourself in this same situation, except that you are motivated to actually take control of the way your salespeople sell. Or more likely, you have some sales processes and useful metrics, but you are motivated to improve the rigor or completeness of your sales management system by refining it or plugging the holes that you now suspect exist. Based on years of experience helping clients design and implement sales processes and measurements, we can offer you our perspective on the best and most practical way to successfully redefine the way you measure and manage your sales force. An overview of the approach is shown below, and greater detail for each phase follows. Implementing a World-Class Sales System Assess Your Current Ability to Execute Design & Deploy the Processes & Tools Align Results, Objectives & Processes Measure, Manage & Coach Copyright 2010 Vantage Point Performance, Inc. 28

29 Assess Your Current Ability to Execute Design & Deploy the Processes & Tools Align Results, Objectives & Processes Measure, Manage & Coach Assess Your Current Ability to Execute The first step in improving your sales force s ability to execute is to understand your organization s existing strengths and weaknesses. While this may seem obvious, it is a step that is commonly overlooked by sales leaders who prefer to jump straight to the deployment of a sales methodology of one type or another. In fact, this ready-fire-aim approach is a tendency in many sales organizations, where analysis is perceived to be a time-consuming, unnecessary evil. However, this quite necessary step is not tremendously time consuming, and it is anything but evil. By understanding where your current sales management system is lacking, you can make highly targeted changes that will have an immediate and powerful impact. Below is a summary-level example of such a brief analytic exercise. How Vantage Point Can Help Analytic tools to assess your sales force Outside perspectives to challenge the status quo Skilled facilitation to accelerate the effort Sales Force Execution Scorecard Strategic Clarity Process Implementation Metrics/Reporting Overall Ability to Execute 100% 74% 58% 65% Coaching Ability Supporting Tools Incentive Alignment 25% 60% 90% Copyright 2010 Vantage Point Performance, Inc. 29

30 Assess Your Current Ability to Execute Design & Deploy the Processes & Tools Align Results, Objectives & Processes Measure, Manage & Coach Design and Deploy the Processes and Tools Once you have isolated your top areas for improvement, you should begin to design and build any missing processes and tools to support the way you want your salespeople to sell. Commonly, this is the most demanding stage of the implementation effort, but it is a one-time investment that pays off for years into the future. If you have no existing formal processes in place, you are in some ways at an advantage. Your challenge is only to isolate the key selling activities for each role in your sales force and then design processes and tools that align with those roles. The primary challenge you will face is right-sizing the system, so that it is neither too complicated to gain adoption nor too simplistic to provide any management value. If you already have formal processes, you will face the design effort described above, in addition to the challenge of either modifying or discarding processes that may not fit your ideal selling model (or processes that you may have licensed from a vendor and can neither modify nor discard). Once the processes and supporting tools have been designed, you must train your salespeople and sales managers how to use the tools within the context of the new processes. Training for the salespeople should focus on how the processes and tools enable better selling, while training for the managers should focus on how the processes and tools enable better coaching and development of the salespeople. Sample processes and tools from past clients are shown below. How Vantage Point Can Help Subject matter expertise to inject best practices Objective voices to evaluate existing processes and tools Process and tool repository to speed design and implementation Methods and resources to skillfully train your sales force Sales Role Process Assessment Role Process Sales Force Mgmt Territory Mgmt Account Mgmt Opportunity Mgmt Call Mgmt Time Mgmt Retail Specialist Technical Rep Field Sales Manager Architecture Manager Regional Manager National Acct Mgr Critical Process in Place Critical Process Missing Discretionary Process Copyright 2010 Vantage Point Performance, Inc. 30

31 Sample Sales Processes Sample Account Process Each April Account Manager Meets w/ Customers to ID Customer Objectives Account Manager Drafts Account Plan for Each Key Account Account Manager Reviews Plans with Manager and Internal Stakeholders Confirmed Plans are Shared w/ Customers Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Monthly Performance Reports to Account Manager Quarterly Performance Reviews w/ Manager Semi-Annual Performance Reviews w/ Customer Sample Opportunity Process and Metrics Engage Prospect Demonstrate Value Negotiate Terms Implement Lead Generated Buyer Conversation Buyer Demo Executive Conversation Proposal Submitted Won/Lost Install/Training Complete # of Leads Generated (In total and by source) % of Leads Successfully Contacted (In total and by source) # of Demos Conducted % of Leads Resulting in Demo (In total and by source) % of Leads with Executive Contact % of Leads Resulting in Proposal # of Signed Contracts Revenue Generated % of Leads with a Signed Contract (In total and by source) Customer Satisfaction Reasons for Win/Loss/No-Decision (% of total proposals) Copyright 2010 Vantage Point Performance, Inc. 31

32 Sample Tools to Support Sales Processes Call Tool Account Tool Call Planning Guide Company Name: Date: Meeting Participants Questions Name Buyer Type Call Objective Anticipated Business Issues Product/Service Alternatives Potetential Objections Response Value Propositions Possible Next Steps Company: Product/Service: Key Account Plan Last Update: General Information Key Customer Contacts Key Contact Function Relationship Customer Name: Account Leader: What We Want What They Want Strategic Initiatives: Current FY 10 Revenue: Stated Needs: Gross Margin: Share of Wallet: Latent Needs: Installed Products: Strategic Objectives: Issues to Resolve: Action Plans Action Items Owner Completion Date Opportunity Tool Territory Tools Opportunity Qualification and Form Company: Opportunity: Team Leader: Last Update: Hi-Touch Customer Lo-Touch Customer Key Prospect Qualification Defined Need: Winnable? Approved Budget: Timeline to Purchase: Buyers Name Type Needs Level of Support Competition Company Strengths Weaknesses Coverage Level # Face to Face Visits Per Year Sales Rep Tech Specialist DSM RVP VP PREMIUM National Accounts - Preferred Strategy Offering Value Proposition Positioning Next Steps Objective Person Responsible Action Item / Completion Date Stage Lead Qualified Demo Proposal Negotiate Win/Loss HI TOUCH MODERATE TOUCH LO TOUCH MINIMUM National Accounts Very Large Large Relationship Large Medium Relationship Regional Accounts Medium Small Relationship 4 2 Small 1 1 Very Small - All 1 1 Copyright 2010 Vantage Point Performance, Inc. 32

33 Assess Your Current Ability to Execute Design & Deploy the Processes & Tools Align Results, Objectives & Processes Measure, Manage & Coach Align Results, Objectives, and Processes By putting the right Sales Processes and supporting tools in place, you will almost certainly improve your sales force s productivity through greater sales discipline and measurement. However, aligning the new Sales Processes with your desired Business Results and Sales Objectives creates a holistic management system that empowers you to proactively manage your selling effort in a way that few executives can enjoy. This is the step that takes sales management to the higher level of rigor and potency. First you must understand the drivers of profitability within your company (Market Share, Gross Margin, Unit Volume, etc.). These desired Business Results then become the targets at which you aim your Sales Objectives (increasing share-of-wallet, reducing discounting, acquiring new customers, etc.). Identifying your Business Results and Sales Objectives must be done with deliberation and careful analysis, because you are setting the direction for your entire revenue engine. Practically, this is an exercise that should take place in your annual planning cycle. As you plan for the upcoming year, you should be selecting the strategies that will help you attain your financial targets, which in turn should inform your Sales Objectives. As this implies, aligning your Results, Objectives, and Processes is not a one-time event it should happen at least once a year, perhaps even more frequently if your go-tomarket strategies shift for some reason. How Vantage Point Can Help Analytic horsepower to identify realistic Business Results and the related Sales Objectives Best practice databases to benchmark your goals against other sales forces Formal Sales Processes enable you to change the direction of your sales force while in a full sprint by replacing one set of Sales Objectives with another. Once the objectives are in place, you must embed them in the Sales Processes by including the Objectives in account plans, or territory plans, or whatever the appropriate planning mechanism. See examples of analyses and recommended objectives from past clients below. For More Information Advice and oversight to ensure Objectives are linked to actionable salesperson activities (Ideally in concert with your annual planning effort) Copyright 2010 Vantage Point Performance, Inc. 33

34 Sample Analyses to Identify Sales Objectives Increase Price Reduce Discounts Increase Volume 2.9% 3.0% Profit Driver Analysis 7.3% Change Required for a 10% Improvement in Profitability Analysis Reveals: Pricing is the key driver of profitability New Sales Objective: Decrease % of Discounting Decrease Delivery Expense 13.4% Eliminate Least Profitable Customers Bottom 14.7% 12% Customer Size >250, , ,999 25,000-99,999 Concentration of Customer Profitability # of Customers Net Revenue Gross Margin 1.67% 2.73% 7.24% Analysis Reveals: Profitability is concentrated in the biggest customers 10,000-24,999 5,000-9, % 11.17% 38.11% 32.49% 19.71% 73% New Sales Objective: Retain and Grow Major Accounts 21.48% 20.49% <5, % 18.97% 9.60% 8.49% 5.25% 4.27% 6.92% 4.47% 4.22% 5.54% Selling Capacity Across Tasks, Roles, and Benchmarks 45% 49.5 hrs 34% 11% 47.5% 51.9 hrs 47.7 hrs 51 hrs 21% 30% 31% 6% 32.2% 6% 2% 8% 8% 37.9% 5% 10% 7% 2% Productive Capacity Face to Face Troubleshooting Outbound Calls Analysis Reveals: ASM s have a relatively low amount of productive time New Sales Objective: Increase % Productive Time 36% 30% 34% 37% Other Non Customer Travel Admin Face to Face Meetings 20% Other Customer Travel Admin/Internal 21% 18% 14% 3% 4% 3% Unproductive Capacity Go To Market Partners Benchmark Data TSM ASM TFR Revenue from Core Products vs. Accessories 5.5% 2.7% 2.5% 100% 90% 80% 70% 60% 50% 94.5% 97.3% 97.5% Revenue from Accessories (23.6% Gross Margin) Analysis Reveals: Accessories have much higher margins but very low sales 40% 30% 20% Revenue from Core Products (15.9% Gross Margin) New Sales Objective: Increase % Sales of Accessories 10% 0% Midwest Northeast Southeast Copyright 2010 Vantage Point Performance, Inc. 34

35 Example of Embedding Sales Objectives in Processes and Tools Call Planning Guide Company Name: Date: New Sales Objective: Sell More Accessories Meeting Participants Questions Name Buyer Type Action: Call Objective Include the Accessories in Anticipated Business Issues All Call Plans Product/Service Alternatives Potetential Objections Propose Related Accessories Value Propositions Possible Next Steps Company: Product/Service: Key Account Plan Last Update: General Information Customer Name: Account Leader: What We Want Revenue: Gross Margin: Share of Wallet: Installed Products: Strategic Objectives: Current FY 10 More Accessories Key Customer Contacts Key Contact Function Relationship What They Want Action: Strategic Include Initiatives: the Accessories in Stated Needs: All Key Account Plans Latent Needs: Issues to Resolve: Action: Coach to the Objective and Measure Success Action Plans Identify potential accessory sales 2. Demo accessory products Action Items Owner Completion Date Copyright 2010 Vantage Point Performance, Inc. 35

36 Assess Your Current Ability to Execute Design & Deploy the Processes & Tools Align Results, Objectives & Processes Measure, Manage & Coach Measure, Manage, and Coach None of your efforts will be rewarded with success if you do not have front-line sales managers that are knowledgeable and supportive of this system of processes and metrics. Sales managers play a pivotal role in the success of the system because they are the only ones that can: Enforce salesperson compliance with the Processes Ensure that current Sales Objectives and good selling strategies are embedded in the action plans Coach the salespeople within the Processes and toward the Objectives Measure successful outcomes from the execution of day-to-day selling activities Judge what changes must be made in Sales Force to improve overall productivity We have often said that if we were forced to choose between training salespeople and training their managers, we would choose sales managers without debate. Managers are the real change agents in the sales force, and they alone determine the success of any sales improvement effort. Unfortunately, most sales leaders favor training their sellers, not their managers, which leaves the pivotal role in the sales force without the skills to deploy and reinforce a rigorous management system. That said, good sales processes and tools with clearly communicated metrics provide a solid foundation for sales managers to begin building their own coaching and development skills. In fact, the processes and tools institutionalize something that most sales forces lack a framework for coaching activities. If you have found yourself saying We want our sales managers to coach, but they just don t do it, then you have a motive to design and implement a set of processes, tools, and metrics like we have defined through our research. How Vantage Point Can Help Assessment tools to evaluate the quality of your sales managers Skilled trainers to coach your sales managers to live and breathe the new system Methodologies and expertise to help you identify risks and challenges before they become points of failure Periodic check ups to measure the success of the implementation Experience and perspective to help you course correct where necessary Copyright 2010 Vantage Point Performance, Inc. 36

37 A Case Study and Concluding Thoughts cycles tended to be long and complex, necessitating Opportunity. Finally, the diversity in their daily activities and the need to prioritize their selling tasks led them to include Time as a key element of their management system. In our experience, there are several distinguishing characteristics that are almost always present in wellmanaged sales forces. They are: 1. A rigorous sales management system in place (processes, tools, and metrics) 2. A visible commitment to the importance and durability of the management system 3. Good and widespread reporting of carefully selected performance metrics 4. An expectation by senior leadership that managers are actively managing and coaching In a previous study that benchmarked world-class sales forces, we encountered one company that offered a striking example of good sales management centered on sales processes, tools, and metrics. 7 The company was a major U.S. integrator of office technology products and services. It had been chosen by its customers as one of the best sales forces in the country, and we were allowed a glimpse into the inner workings of their highly successful sales management framework. Their management system had evolved over time with their changing needs, but it perfectly reflected the themes that emerged in our recent research, and it was unquestionably a major contributor to their marketplace success. Selling Role, Objective, and Process Selection The sales role we studied was their field sales rep, whose Sales Objective was to acquire new customers from an assigned geographic territory of small and mid-size businesses. The Objective was first characterized by a large number of potential customers who needed to be prioritized in order to allocate effort wisely. Therefore, Territory was critical. Additionally, the sales Detailed Sales Processes and Tools Territory was smartly embedded in the sales force s annual planning cycle. Once a year, every sales rep would prepare a business plan for their territory and present the plan to their peers for critique and advice. This plan then became a coaching tool for the sales managers to use throughout the year to guide and counsel the reps. Commented the company s SVP of sales, We make sure we are coaching from the business plan because it is their words, not ours, and we want to provide feedback to them on how to be successful. In addition to the annual business plans, Territory is reinforced by the use of war rooms. The war room walls are covered with maps showing the locations of their major account targets, as well as their market penetration in key geographic areas. Reps gather there in the early mornings and late afternoons to track their progress and get energized for battle with the competition. Time and Opportunity activities were combined in a process that they call STAMP their Sales Tracking and Activity Program. Every week sales managers meet with their reps to review their upcoming activities, help them qualify leads, set strategies for meetings, and other coaching activities. Their SVP observed, The cornerstone to our sales strategy is our weekly one-on-one meetings between our rep and our manager. We are kind of old fashioned in that we track a lot of our activity. We call the process STAMP, and it focuses on how many cold calls our people make, their appointments, their proposals, their demos, and where they are in their sales cycle that we are managing. (Ironically, we believe that their approach is not old 7 The Chally World Class Sales Excellence Research Report, 2007 Edition, HR Chally Group Copyright 2010 Vantage Point Performance, Inc. 37

38 fashioned it s new fashioned, as active sales management is the only path to elevate professional selling from an art to a science.) Their SVP also explains that the STAMP process is where their sales opportunities are analyzed and reported. It also has our sales funnel inside of there. We have a certain amount of revenue that we want each rep to have in their 30/60/90 day cycle. If they do not have that revenue, we know that they have to go out and do more prospecting. In total, this sales force s business plans, war rooms, and STAMP embody the processes and tools that are relevant for managing their sales rep s selling effort. The processes are rigorous and management is very proactive. In fact, the sales force environment is described as intense, which might seem threatening to many salespeople. However, their sales force turnover is an amazingly low 10%. Says the SVP, It s a lot of paperwork, but it s all focused on bettering the salesperson. There s some stress in it, but once you see the results, it s kind of hard to argue. Metrics As you might expect, this company is very keen on measuring the performance of its sales force. At the Process level, they have targets and track performance against a number of activities: # Cold Calls # Appointments # Proposals # Demos # Customer Follow Up Meetings # Assigned Accounts # Days Training In addition, they report Sales Objectives such as success in advancing calls and acquiring new customers. Of course they also measure Business Results like their Sales Pipeline metrics and Financial performance. But they went one step farther by comparing the relative performance of their different business units across key metrics and then isolating the practices of their top performers. Their SVP of sales describes the benchmarking process: It really frames our performance inside of the company. It is a stack ranking that we publish every month and it goes to every single one of our business units. It is shared with all of our employees. It talks about things like Average Sales per Rep and Average Customer Response Time. We know every BU and where they rank, so when we might be struggling with something, say you are number 20 in the rankings, there are 19 guys in front of you that are obviously doing something better in the benchmarks. It is very easy for you to pick up the phone and talk to them about what they are doing to see if you can implement their practice inside of your business. Outcomes It is clear that this company believed in using metrics to drive sales execution, and it had the success to prove it. The company s Average Revenue per Employee was 36% higher than its industry peers, and it was acquired by a major office equipment manufacturer shortly after our study explicitly for the quality of its sales force and customer relationships. Copyright 2010 Vantage Point Performance, Inc. 38

39 In Conclusion Our research into the use of metrics to drive sales force execution allowed us to put into a formal framework many of the best practices that we had already observed while working with our own clients and while benchmarking other world-class sales forces. These forward-looking companies had the vision to see that sales organizations of the future will not look like sales organizations of the past. The sales function is rapidly evolving from an undefined art into a highly manageable science, and those companies that continue to operate without a system of processes and metrics will be left behind by competitors who can shift their strategies at any time and watch with confidence as their sales forces behaviors shift in synch. Implementing a system of processes, metrics, and tools to manage your sales force is a key checkpoint along the road to sales excellence. We believe that the findings of this research provide clear vision to the destination. If you would like to investigate ways that you can apply these findings to elevate your own sales effort, please contact us to schedule an exploratory conversation. Copyright 2010 Vantage Point Performance, Inc. 39