When your sales managers measure performance do they typically mention the sales pipeline and the status of some hot deals? The answer is probably yes. Even more certain is that sales quota is a key measure in this regard. And while quota and pipeline are excellent indicators of performance, these aren't the only signals sales leaders should be paying attention to. Sales pipeline and quota are not the end all be of all for assessing where your team and its individuals stand. This approach is a notch better than a gut feeling, but it only gives you a glimpse of the battlefield. To make changes that will help your team hit their numbers and beat the competition you need to see the whole picture. This means diving deeper into the additional dimensions that provide a more comprehensive look at your sales performance.
The Right Answers Starts with the Right Questions
Sales professionals have more data available at their fingertips than ever before. The irony is that all these numbers haven’t necessarily led to more answers or insights. In all honesty, it’s probably led to more confusion as the sheer quantity of numbers leads to analysis paralysis. It’s one of the reasons many sales leader end up only examining sales pipeline and metrics associated with quota. This approach is simple and painless. But the right questions can help you find the right numbers. In a recent webinar, Shane Frederick, Xactly’s director of enterprise sales, pointed towards the questions below as ones that reveal important information about the health of a sales org. The key here is focusing on numbers associated with low and top performing reps.
- Are you getting your money's worth or paying too much? Pay and performance discrepancies can really hamper the effectiveness of compensation spend. Using your money wisely means being able to get an active pulse on where everyone stands quickly and regularly. Look to inconsistencies between quota attainment and pay. Are certain reps being rewarded for skating by or not being rewarded enough for hitting quota?
- Can you identify the middle performers? Reps in the middle of the curve, the core performers, have high upside. If managers are aware of those in the middle, they can use some TLC to improve their close ratio and move them towards the top.
- How are your reps getting paid in comparison to the market? To keep those top performers, you must pay competitively. This means having access to benchmarking data and regularly checking market rates against quota attainment. Otherwise, that rep could become your competition and pay for that raise can come in the costs associated with training new hires.
You may have noticed a trend in these questions: frequency. Actively keeping an eye on this stuff is crucial to making the correct improvements before it's too late. One of the best places to review for early warning signs is not the sales pipeline, but OTE (on target earnings).
Moving Beyond Quota Attainment
The thing that sales managers need to follow is the money. No, not quota. While quota attainment YoY is typically thought of as the best tell for warning signs, it’s the dollar sign that matter for sales. Sales leader need to consider performance from the rep’s perspective, i.e. look at OTE. Some quick steps to do this are as follows:
- This one is obvious but vital. Start with the past. Any number must be compared to the same data from last year—just like a 10Q financial report shows performance against the same period in the prior fiscal year.
- From that POV, look at data points that are critical to a well-functioning sales team:
- Rep progress towards OTE (a rep’s number is their earnings, not their quota)
- Turnover rates overall and by teams (watching for unusual spikes)
- Tenure of the sales force and open positions
It’s in these numbers that many telling outliers and predictors can be derived. What can’t be stressed enough is the psychology of the rep. Quota is a means to end—earnings. Follow that trail to find early warning signs. Speaking of money, how are your commissions doing?
Reevaluate Your Commissions
Another place with a heavy impact on sales performance that does not get the attention it deserves is the actual commission structure. Organizations spend an average of 9% of revenues on commissions, but since this is just as the cost of doing business commissions are not optimized as a strategic tool. What’s more is that data is needed to make most decisions in a modern organization. So it’s crazy that a line item of this size often is allowed to go on without little data-driven scrutiny. One of the great benefits of ditching the spreadsheets and moving towards automated commissions software is that data is made more readily accessible. Once you have access to these numbers, you should be asking a few key questions:
- Are my resources being allocated appropriately?
- Are incentives driving the right behavior?
- Are my teams motivated?
While these questions are general and might take some finessing on the data side to get answers, looking into these numbers will provide invaluable insights. With the broad inquiry, a drill down of sub-questions will inevitably arise as you attempt to find the metrics to match. This cascade of questions and answers will show you what’s really happening on the sales performance side.
Measuring sales performance doesn’t have to start and stop with your pipeline. That doesn’t mean ignore it, but broadening your scope to assess the elements that often go ignored can be even more effective in providing accurate forecasting, quota setting, and warning signals. Look to the additional data associated with the lower and high performers to understand sales health. Look to OTE for better forecasting. And reevaluate your commissions data to round out these insights into a comprehensive assessment of sales performance. The bottom line is that once you start to listen to data sources beyond sales pipeline numbers you start getting the full story.