I’ve had the chance to speak to lots of sales leaders in the course of developing our new Application, www.getmyroi.com, and it was interesting to step back and digest what I was told. One thing I noticed is that not many sales leaders really ask, “what is my responsibility?” Or put another way, “what key business metrics – results - am I really here to deliver and influence?” Here’s the catch, the answer to that question and the question, “what am I supposed to be doing – what tasks?” are different. They are NOT THE SAME. Now, wait a second. Before you raise your hands and accuse me of being insulting or patronizing, I’m not suggesting most VPs of Sales don’t know what they’re doing or at the highest level that Revenue isn’t the obvious answer. Not at all. I am suggesting that at least a slightly shifted focus would help sales leaders better achieve their goals. Metrics vs. Tasks.
Tasks include things like hiring and retaining talent, making sure the team has the corporate messaging down, setting quotas, building a channel, working with marketing, training, etc. Important? Of course. Some folks call many of these tasks leading indicators. But training may or may not impact performance. Firing one then hiring another rep may improve revenue, but not necessarily. These tasks have to be implemented successfully. The impact of these tasks - the RESULTS - have to be measured. Running more line drills or shooting more free throws in practice doesn’t automatically mean we win more basketball games.
Of course THE result that the VP of Sales is responsible for is Sales, or Revenue. But that’s too high level. There’s nothing terribly useful in that goal because it’s obvious. It needs to be broken down a little in order to give us something useful to monitor, measure, and improve that eventually rolls up to the ultimate goal.
I would argue the list of things a VP of Sales is really responsible for – his Key Performance Indicators - is pretty simple, at least with respect to folks who sell expensive, complex, “enterprise” solutions: ASP, Time, Conversions, Efficiency, and Cost.
- Average Sales Price (ASP) – The beauty of this metric is how impactful a focus on improving it can be on your overall Revenue. First it has a one to one correlation to revenue – increase your ASP by X, and all other things equal, you increase your revenue by X too. Second it touches on one of the great banes of better sales – using discounting to sell. In other words, a focus on improving overall ASP is a focus on fundamentally improving how you sell. A focus on alignment instead of features. On value instead of demos.
- Sales Cycle Time – A reduction in the amount of time each deal takes also has a one to one relationship to revenue. A perception of higher value and alignment will improve urgency, so here too making shorter sales cycles a priority by default means an improvement in the very basic elements of how you sell.
- Sales Conversion – Define Opportunities as you will, but having an understanding of how many opportunities (that came from marketing generated leads) become deals is one of the most important metrics in selling. And it’s an indicator of the success of one of the most important talents/skills: qualifying. Qualifying better means working the right opportunities, and converting more of them to deals.
- Sales Efficiency – the first three are really the essence of sales effectiveness and have by far the greatest impact on revenue, and yet – ironically – most Sales Leaders and organizations focus on efficiency vs effectiveness. A more efficient sales force is absolutely a proper goal, but any investment here rarely has the leveraged impact as something focused on the first three. Basically more efficiency means more time selling for reps vs doing other things like admin.
- Selling Costs – Sales leaders and sales people should be focused on the top line, but not to the exclusion of the cost associated with driving that revenue. Flying to Paris on a first class ticket for a first meeting with an unqualified prospect can probably be done more cost effectively.
Despite clear evolution, sales and marketing are still mostly separate functions/departments, so this is the list. Might this need to be shifted in a more ideal totally integrated Sales and Marketing entity? Sure, but from where I sit, that kind of organization is still pretty rare. Generating leads, and making deals happen are still two fundamentally different functions today. Also, there’s no doubt that selling a better product or one that is in high demand, is going to improve these metrics too. In other words, factors outside of sales can impact Sales KPIs, which is why it’s important to establish benchmarks.
There seems to be an opportunity to give sales leaders a better way to track and impact sales performance. As an example, my opinion is the single greatest task a sales leader has is to hire and retain top talent. Switch a mediocre salesperson with a great one and you will almost magically improve key metrics. But the point is you’re hiring that superior rep to help you improve key metrics, not because he’s nice, or has a rolodex, or good experience, or some other trait. The KPIs you –and frankly your boss – should use to track your performance are what drive your tasks. Not the other way around. Measure shooting percentage in the game, not the number of shots taken in practice.
