CASE STUDY Metrics-Led Sales Training Implementing Impact-Based Decision Making For Sales Force Training Investments March 2009 Gary Summy Director of Sales Development, Trane Commercial Systems Published in conjunction with the Society of Sales and Marketing Training The Sales Management Association +1 312 278-3356 www.salesmanagement.org 2009 The Sales Management Association and Gary Summy. All Rights Reserved.
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Metrics-Led Sales Training Implementing Impact-Based Decision Making For Sales Force Training Investments Sales Leaders and Training professionals have been in search of a way to quantify the effectiveness of the development of their people. Is there a return on investment for training the organization to be better negotiators? To better understand products and services? Donald Kirkpatrick introduced his 4 levels of training measurement in his book Evaluating Training Programs (ASTD 1975) and others have continued that work. One of the things we attempt is to change the perception from training being a cost to the organization, to training being an investment. ROI: The Quest While the quest is admirable, is the effort worthy (or even attainable)? ROI is an extremely useful metric when applied to capital purchases, investment options, and other expenditures and alternative uses of capital. But is it really appropriate for sales training? Can it or should it be applied to learning? I often hear from my colleagues focused on other training related disciplines that I have it easy since sales training is simple to measure. Did they sell more? It would seem to be an easy measure to capture and prove our results. How easy is that? Or is it? Looking at the overall topic of measuring training effectiveness, we are looking at what effect the training had on the business its Business Impact. 3
Let s look at some classical dilemmas in the evaluation of Sales Training. Many things affect the measurement of sales training impact, not the least of which are deciding which metrics are most appropriate to use. We know that simply looking at increased revenue (gross sales) is not always the best measurement. For example, gross revenue may increase, but how about net revenue? Selling more at lower margins with a higher cost of sales is probably not the long term goal of most businesses, and if we measure only that aspect, what have we proven? However, if the corporate objective for a given period of time is market share (often at the expense of margin) it could be a more reasonable measurement to consider. Of course this implies we have selected revenue as the market share metric instead of the myriad of other metrics like units shipped, units in the pipeline, number of active customers, and a host of others. We want to be sure that whatever we attempt to measure (and hopefully the focus of our training content) is appropriate to the corporate objectives. Negotiations training with a focus on margin improvement, in the middle of a campaign for market share improvement at virtually any price, may not be a mutually supportive choice of engagements. For the sake of argument, let s assume we are in alignment and the expected outcome of our offering is designed to address the needs and objectives of the business. We deliver our training, the smile sheet evaluations are all top box (they loved the doughnuts), and three months later the business metrics we have targeted show positive improvement. Life is good and we have proven our value. Except that Marketing steps in and makes the case that it was their amazing new promotion or literature, not the training that made a difference. In the meantime, finance tells us that the market growth during the measurement period would account for most of the financial gains, and the strategy gurus claim it was their insight on the markets and customers to target. And just when we think everyone has joined the grab the credit melee, in comes the competitive intelligence group to confirm two of our major competitors suffered significant shortages of materials in their supply chain and were unable to meet some delivery commitments, so no one can claim credit. Since we work in a dynamic and changing marketplace with competitors, suppliers, market forces, sometimes natural disasters and phenomenon all having some impact on results, how can training take credit for specific ROI gains and come up with a return on investment figure? With so many things potentially (and actually) having an affect on the performance of a sales organization s financially related metrics, it is difficult to claim, much less validate a true ROI for sales training. Identifying Metrics Step one in measuring the impact of a training initiative is to look at metrics that matter. Look at key factors that are currently being measured in the organization. The question becomes, how do we show improvement if we don t know where we are now? When no baseline exists, it is impossible to validate movement positive or negative. The lesson is never promise impact, or attempt to show improvement, if there is no starting position. You may move the needle, but how will you know, conclusively, the 4
amount or even direction of movement. The degree of impact of where you finish depends on where you started. Without question, we must begin with the priorities of the organization. A sales leader or training professional should have a good idea of what these critical metrics might include. Here are some examples of potential metrics of value to an organization where a baseline may exist. Funnel Speed or Sales Cycle Time Level of Relationships (top to bottom) Breadth of Relationships (horizontal across business units and departments) Call to Close ratios Number of Units shipped or in the pipeline Mix of Units shipped or in the pipeline Product to Service Mix Revenue Generated Revenue Mix across product/service lines Margin/Profit Generated Margin/Profit Mix across product/service lines Sales (fiscal or numeric) of Targeted Product/Service Lines Sales Mix (fiscal or numeric) of Targeted Product/Service Lines Sales (fiscal or numeric) in Targeted Markets Sales Mix (fiscal or numeric) in Targeted Markets Repeat Customers (same mix) Repeat Customers (new products) New Customers Number of New Opportunities Added in the Pipeline Size of Transactions Breadth of Transactions across Products/Services/Markets Time to First order or revenue (new representatives) Time to Breakeven (new representatives) Customer Satisfaction (Surveys and Comments) This list, along with metrics appropriate to your business environment, should give you ideas of how to begin measuring impact of sales force training. Don t make it too complex by trying to use the whole list, but pick the most relevant 3 or 4 metrics. They may already be defined in your company s business plan and objectives. If not, use your general knowledge of your company and its goals to identify those metrics which reflect the priorities of the business. 5
These metrics can potentially help you with two areas. Building the business case for conducting the training in the first place and then measuring impact after. The list contains business and sales metrics, not training metrics. The key is to focus on what is critical to the organization, not to a training department. Once we know the key metrics that can be improved by a training initiative, we can begin to explore how to measure them and how to link our efforts to positive changes in these metrics. Once results are viewed as an investment, and having an impact on the business, decisions on future initiatives will be easier to make. Finding money for those future initiatives will be easier because everyone will be thinking of the business impact, rather than the expense involved. I cannot in good conscience write this article without commenting on subjective evaluation of training initiatives. Let s say I asked you what is more valuable, objective data or subjective analysis? Most people believe that hard or objective data is the more valuable and I would not disagree that this type of information can make a compelling story. On the other hand, is it possible that this type of data might be misleading at best? It might even create a false or inaccurate analysis of the true situation. It is possible to maneuver the statistical response based on what you measure, when you capture the data, how you capture the data, and a variety of other techniques. There can be very valid reasons to conduct training that will not have hard data as the result. Take for example an end of course questionnaire that captures the participant evaluation of the value or impact of the course to their on the job requirements. This is often used in an attempt to produce objective data that shows the course has on-the-job impact. This is not objective data, but is a numerical value that is easy to compare and gives the impression of objectivity. I have also seen this type of question used as part of the validation of the elusive ROI calculation, using the results to point to direct links between training program and job impact. However, potentially a program could receive excellent responses immediately after the session with participants responding they see a direct link to their ability to perform on the job. Based on the questionnaire, the case is made that the participants recognized the value and potential for impact. Often these surveys are done immediately after the session or within 48 hours using web push technologies. However, the same survey taken three months later may have a totally different set of results. In this case, the objective data may appear to support the fact that the intervention had (or in reality appears to have the potential to) impact on job performance. While objective data is valuable and compelling, it can often be trumped by subjective data based on the source and how it is presented. Although we often want objective validation of a program s value, we often use subjective information to make decisions. The Team and Real Impact As a final thought I want to share my view that training alone will have no impact on your organization. Training, even the best training, is designed to develop capability. Participants in a training 6
engagement should, at the end of the process, be able to do things in ways they were unable to do at the same level of proficiency when they entered the program. However, just because they can, does not mean they will execute those skills on the job, and that is where the impact to the organization will happen. Performance on the job is within the scope of responsibility of the manager or coach, not the training department. As such, any attempt to train the sales people must also include the management team in both the skills and how to reinforce and promote the use of those skills on the job. Train the sales people without training the entire sales team, including the management team, and impact will happen only by chance, not design. Training to develop the culture of the organization may or may not have a direct impact on the business IN THE SHORT RUN, but it is likely to be a worthwhile investment in the people and the organization. Looking for a return on major training initiatives makes sense, but the concept should be balanced with reasoning and doing what seems like the right thing to do. Once developing sales people is viewed as an investment, and having an impact on the business, decisions on future initiatives will be easier to make. Finding money for those future initiatives will be easier because everyone will be thinking of the business impact, rather than the expense involved. Investing in the human capital of an organization can be a worthwhile investment. 7
About The Author Gary Summy is Director, Sales Development at Trane Commercial Solutions. Mr. Summy is a contributor to Sales Training Solutions, written by 11 sales training professionals. He has over 30 years experience providing sales insight in diverse markets, with significant emphasis on technology. Prior to joining Trane Commercial Solutions, Mr. Summy was Global Director: Performance Development, Sales and Marketing for Motorola. Mr. Summy s is on the Board of Directors of the Strategic Account Management Association, and is President of SMT The Center for Sales Excellence (www.smt.org). 8