Sales Benchmarking: What to Measure in a Tough Economy?
To turn the tide on sputtering revenue numbers, sales organizations ratchet up pressure on sellers to hit targets.
Many will seek a fool-proof formulaic antidote. The more scientific it feels, the more control it gives over success–or so they presume.
Some swear by sales benchmarking. Landslide Technologies’ SFA (sales force automation) application ensures you can “govern the sales process in an effort to drive large deals through the sales pipeline in a consistent manner." Just use the SFA application to track your big deals and they’ll pump out new accounts like a canning machine on an assembly line.
Do benchmarks work? Or are they a desperate attempt to CYA at each level of the food chain in the event of a day of reckoning?
One recent article from a worldwide sales training company described benchmarking as “a sales rep’s GPS, helping to map out routes that were either successful or time-consuming in the past in order to devise a more efficient course”.
Here’s their GPS system:
To simplify this already-simple model: all things being equal, if you make more calls per day (CPD) or increase your close rate (CR) or increase the average size deal (ADS) or if you have more salespeople (SP), you will increase your AS (Annual Sales).
The author of the article lauds this wildly lagging indicator of performance stating, “their (sellers) improved time management efficiency as the result of this benchmarking model will free themselves up from dependence on marketing departments for leads, support and differentiators.”
I couldn’t make this stuff up.
Feeling liberated yet? What a relief! Without burdensome leads, support and differentiators from marketing, sellers can work the levers on the benchmarking formula and land on their AS (don’t pardon the pun).
Some of the largest sales organizations tell their team to abide by their model – or else.
Now, let’s stipulate that tracking and measuring sales activity is critical to success. Still–too many sales organization have a knee-jerk response to sluggish short-term performance, namely engaging in short-term solutions.
There lies the slippery slope of micromanagement. Knee-jerk short-term solutions to short term indicators. It’s a recipe for low trust and high turnover.
Eventually, quality selling activity gives way to “prettying up” the spreadsheet. “My, that’s a good looking chart,” says the visiting exec from HQ. Meanwhile, the team is thinking, “those numbers are bogus; plugged into Excel the night before to impress the brass.”
GIGO. Garbage in, garbage out.
When I managed a regional sales organization, corporate decided to split the sales force into hunters and farmers–to improve the “cost of sales” ratio of gross comp to revenue.
We lost a $10.5 million deal. Why? We severed the relationship between their rep and the procurement director. They, in turn, severed us.
We broke their trust, plain and simple.
What benchmark tracks lost accounts and missed opportunities due to relationship issues? None I know of–yet their impact is an order of magnitude bigger than what benchmarks mark.
Harvey McKay (author of Swim with the Sharks without Being Eaten Alive) offers a better predictor of selling success than all the formulae, algorithms and sales funnels combined. It’s a list of questions he calls the McKay 66. He suggests that relationship-oriented information is king (mostly centered around the client relationship – not their stated needs).
For example:
* #39. On what subjects (outside of business) does the customer have strong feelings?
* #55. What is he/she most proud of having achieved?
* #58. What moral or ethical considerations are involved when you work with this customer?
Doesn’t it make intuitive sense that knowledge of answers to these kinds of intimate questions reveal more about our progress with a prospect or account than the number of dials, appointments or calls?
Selling always was and always will be, first and foremost, a referendum, not on process and statistics, but on the loyalty developed between sellers who can build relationships with buyers.
This is a compelling post, Mark. Thanks for sharing your insights and your passion. I’d love to see the full McKay 66.
Thanks Andrea. Here’s a link to the McKay 66. It’s a good template to use to build your own. Maybe the Howe 77?
Hello, Mark,
I’ve tried (not always successfully) to live my life operating from the principle, "take an interest in people and they’ll take an interest in you" – at work, at home, and at play.
Basically it’s about: first, I’m a human being in relationship and then, by the way, a ____ (fill in the blank with a role, position, etc). I think this reflects McKay (and others who come from a "service and servant" perspective) when he points to a relationship-oriented (rather than a task-oriented) approach to people.
Using a "GPS" with people, "the quickest way to get there" (a sale, etc), at the expense of perhaps taking a detour (the human element), or the scenic route (the human element), can often lead to a dead end.
Peter,
Well said. I couldn’t agree with you more!
Thanks,
Mark
"Selling always was and always will be, first and foremost, a referendum, not on process and statistics, but on the loyalty developed between sellers who can build relationships with buyers."
Mark, This comment is a perfect ending to your column and a near-brilliant observation on relationship selling. It is so good, I am going to repeat it every chance I get – with full attribution – when I do any sales or sales management training or coaching!
PS. I am a big fan of the McKay 66. What is so remarkable about it is that it is a mainstay of an envelope company that could otherwise be going the way of the buggy whip.
That’s quite gracious of you James. Know that Charlie is my inspiration and mentor on all things trust. Keep on selling with trust!
Even as a mathematical formula, this is strictly limited. Yes, it describes the current relationship of activity to results – but you could equally as well calculate sales as # of invoices x average amount on invoice. The big question is will increasing the number of invoices you print & send increase your sales?
As a predictive formula, it only works if you assume that each of the factors is independent. If you make more sales calls, will the deal size and close rate remain the same? Unlikely – unless you are targeting an underserved market with plenty of high potential customers as yet untapped.
And, of course, it ignores the fact that – as you point out – those inconvenient factors like differentiation and lead generation are what actually have a huge impact on close rate and deal size.
To be fair, the pharmaceutical industry used this sort of simplistic model to ramp up growth in the 90s. But that was an initially underserved market which eventually became saturated as the "sales force arms race" led to extreme diminishing returns for simply adding more reps & more calls.
My experience is that this model can be extremely seductive to senior managers. Not only does it (seem to) reduce a complex system to a few variables – it also gives the illusion of control. Helping sales reps establish closer, more productive relationships with clients sounds fuzzy and difficult to control. Adding more "resources" and cracking the productivity whip sounds like the the sort of thing a decisive macho executive should be doing.
Ian
Ian,
Couldn’t agree more with you.
It has the same form as the financial DuPont formula. It is a very clever financial formula which deconstructs return on equity into the three components of return on assets, asset turnover, and profit margins. Educational, yes; but a practical management tool, absolutely not.
The same is true for the three Trust Models we use here. The Trust Equation (Credibilty + Reliability + Intimacy) / (Self-orientation)
is the model everyone loves–it’s insightful, clever, and can be quantitatively manipulated. But the workhorse, practical model we use is the Trust Conversation model, as well as the Trust Principles.
I think you’re right to note the seductive nature of analytical models. As Mark said initially, they do a great job of driving from the rear-view mirror, and give the illusion of control. But that’s what it is–an illusion.
And I must chuckle at your "crack the whip" description of the pharma sales arms race; that also rings true. In some ways, the most harmful management mantra of recent years has been "if you can’t measure it, you can’t manage it." It’s not only obviously false on the face of it, it suggests to people that good management consists of measurement. Combined with monetary incentive-based views of behavior, this too often leads to a view of management we might call "rats and cheese" management. Sprinkle the cheese in strategic places in the maze, then optimize for efficiency and cheese costs, and voila, you can manage too.
Something just a tad more humanistic would be appropriate, methinks.
Great dialogue on this blog. I’m a big believer in using a balanced model to assess performance and improve overall results. I’ve been stressing to my management team and sales reps the importance of performing the right behaviors at an optimal level of frequency, consistency, and effectiveness. Thus, the number of times a behavior / activity is done is important an important factor (e.g. # of calls, # of contacts with members of your network, etc.), but not entirely sufficient in getting to the goal. The ability to consistently perform the behavior / activity and perform it at a high level of effectiveness are equally as important. For example, a sales rep may have outstanding skills in prospecting (consistency & effectiveness), but if they only focus on prospecting two hours each month, they may be achieving subpar results. Putting these principles into action, I’ve developed a scorecard using leading and lagging indicators to assess our reps’ performance in frequency, consistency, and effectiveness. Several of the metrics are subjective in nature, however I feel confident in the assessment of our talent based on the rigorous discussion we have on the performance of individual employees on a quarterly basis.
Thanks for the posting — great stuff!!!