How to Measure Sales Performance
How do you measure a salesperson’s performance?
That’s easy. Look at sales.
Not so fast.
Yes, revenue is the ultimate performance indicator. But revenue is a “what.” You want to know “why.”
To understand why revenue is where it is, look at input: a salesperson is doing to generate sales. Look at sales activities.
You can’t control output, specifically revenue. That depends on a variety of factors, including competition and the overall economic environment.
But you can control input — sales activities. If you don’t like the sales results, change the sales activities.
The Performance Pyramid
Below is a graphic showing a sales “pyramid”. At the top are revenue and profitability — Results. At the bottom are sales activities or “performance drivers.”
Jason Jordan in Cracking the Sales Management Code focuses on three levels: Sales Results, Sales Objectives, and Sales Activities.
Sales Objectives produce Sales Results. But a Sales Objective, like a sales result, is an outcome. Sales reps and sales managers have some, but not much, control over Sales Objectives.
They have a lot of control over sales activities.
Focus on what your sales reps work on and work with: the types of prospects they call on, how many contact they make, and the sales tools they use. You can do something about that.
Activity Matters
Most sales reps have revenue targets or sales quotas. But they need more. The need activity targets.
These are numerical goals for qualified leads, phone calls, meetings, proposals etc. Some of these may be weekly goals. Others may be monthly or quarterly.
Having activity goals is not enough. Your reps should track and record these activities religiously.
At the end of each week a rep — and her manager — should know how many: good opportunities she’s working on, calls she made, meetings she had, events she attended, and proposals she sent out.
Your CRM system should automatically should track this for you. Otherwise, reps can set up and maintain a spreadsheet to track sales activity. But that’s pretty inefficient.
Here are some of the activities for which a sales rep should have goals and should track systematically. “Activity Metrics” are the things they should track.
Quality vs Quantity
A sales rep must first focus on quality — the quality of opportunities. If she pursuing the wrong opportunities, she could have a stellar outreach and networking effort (quantity) and still fail. That’s because she’s not offering the right things to the right people at the right time.
- The Right People — Make sure your reps are targeting people who meet your prospect profile (Industry, company size, product mix, job title). Prospects who don’t fit the profile may not have the need or budget for your offering.
- The Right Time — A prospect may fit your profile perfectly but may not be willing or ready to buy. Your reps need to be able accurately gauge a situation and determine whether an opportunity really exists.
- The Right Things — Offering the right things to a prospect requires an understanding a prospect’s problem and how badly he wants to solve it.
Sales Reps should create an “Opportunity Score” for each prospect. If the prospect doesn’t meet a minimum score, she should not spend a lot of time on that company.
For more on creating opportunity scores, see my blog post “What Are Your Sales Reps Working On?”
Watch the Pipeline
As I mentioned earlier, it’s hard to control the three key pipeline metrics: Close Rate, Sales Cycle, and Selling Price. However, they are important indicators. And they will tell you a lot more about your sales effort than simply looking at revenue.
If any of these indicators are out-of-whack, that could be a right people-right things-right time problem.
Your reps can fix this with a better opportunity analysis.
About the Author | Peter Helmer
Peter Helmer is a principal in The Sales Management Group (SMG) which provides interim sales management and sales consulting services to middle-market companies. SMG works with CEOs and sales leaders to improve sales efficiency and effectiveness. SMG’s services include: sales audits, compensation plans, sales leader onboarding, and territory management plans. Peter writes the Sales Management Blog.
