A popular quote from Lord Kelvin, an eminent scientist from the 19th century, sums up the need for performance measurement when he says, “If you cannot measure it, you cannot improve it”. Without a well thought out, standardized and consistent means of measurement, you cannot measure performance and thereby cannot improve your chances of success. Performance measurement is what defines success. In the sections that follow we shall invest time in exploring the various approaches employed in measuring sales team performance and discuss a few key metrics.
Long-term vs Short-term Sales Performance
Most business leaders tend to believe in quick results which more often than not are short term. Business leaders should not only be invested in short term goals but also look up to meeting long term goals to ensure balanced and consistent growth. Short-term goals and targets are still significant within the sales pipeline. They provide a sense of urgency and purpose to individual efforts. However, long-term goals play a crucial role in setting the direction for both individual sales representatives and the entire team, ultimately leading to long-term success within the sales pipeline.
As a business leader, you should set your teams, well thought out short term targets along with a few long term goals. The short term targets should align well with long term goals. Short term performance can be quickly measured and tracked. An efficient performance management system can help you track performance, compare sales performance over weeks, months or quarters, both at an individual as well as a team level. Frequent performance reviews against short term goals keep the sales folks focused on the job. Long term performance reviews help in keeping the teams focused in the right direction and enable any course correction if needed.
The 2013 Sales Compensation Trends Survey suggests that close to 30% of the participating businesses in the survey employed long-term performance metrics along with short term targets.
What to measure? individual or team performance?
In evaluating sales performance, attainment of sales quotas is a commonly used and precise performance metric that measures the effectiveness of individual and sales team roles within the team by emphasizing short-term objectives. Beyond sales quota, business leaders often look for help in figuring out whether to focus on individual performance or overall team performance. It all depends on the nature of your business. If your business needs people with varied skills to collaborate and grab a deal, you will have to set team performance targets aside from individual ones.
Relying solely on a sales performance management system that emphasizes individual performance can foster a culture of "every man for himself." It is crucial to incorporate sales team performance metrics that acknowledge and value collective contributions, as this plays a significant role in motivating the sales team. While these may be designed as long term goals, they should have credible weightage in the long term assessment. As a matter of fact, many businesses of repute, close to 40% of them to be specific, employ a performance metric that measures the contribution to team success. Often, contribution towards team success is a qualitative attribute. Regular peer reviews can be a good way to assess team contributions. With peer reviews, workplace hurdles like ego clashes and strong differences of opinions are managed well in the long run.
What metrics to measure?
Aside from sales quota, there are a few other metrics that you might want to go through before you freeze on them. We wrap up this blog with a list of such metrics that help you measure sales team performance. The use of these metrics to gauge sales team performance is pretty much a standard across industries.
Sales Cycle length
Sales rep efficiency reflects well in the length of a sales cycle. The shorter the sales cycle length, the more efficient your sales rep is. If you see an entire team falling short on this metric, you know there is a roadblock that needs attention. It could be a systemic problem related to tools in use, or it could be the back office system that is slowing things down. In any case, a slower cycle time will lead to lower sales and more importantly loss of important clients.
Quote to close ratio (or “Conversion rate”)
It is simply the ratio of quotes to deals closed. It again highlights the efficiency of a sales rep in targeting the right prospects. A lower quote to close ratio might also indicate data quality issues of prospective clients.
Average deal size per sales rep
This metric reflects on the ability of the sales rep to funnel and prioritise opportunities and prospective customers. It is generally understood that larger deal sizes are difficult to close, as prospective clients are more careful about their choices when it comes to huge investments. If a sales rep is consistently able to score well on this metric, you know that the sales rep is doing all the homework needed to bag the deal at all costs. Such sales reps can be your future sales leaders. You as a business leader should identify and nurture such talents.
There are other metrics that help you assess your sales team performance, but they usually piggyback on the above core metrics to show a broader higher view across teams, products, territories and regions. An important cog in your sales performance measuring system is the tool used to upload, track and analyse sales team performances. We at Kennect provide cutting edge, intuitive tech solutions for sales team performance management and incentive management. Our flagship solutions Incentive Compensation Management and Sales Performance Management, integrate seamlessly and offer you a flexible and easy to use the system to design, build and track your own sales team performance management system.
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