This blog post is extracted from the SiriusDecisions Research Brief “The Definitive Framework for Sales Metrics,” available for free on the Domo Learn Center.
THE EXPERIENTIAL DATABASE
Sales leaders are regularly asked three seemingly straightforward questions by their chief executives: What happened, what will happen, and why are things happening as they are? One needs to do little more than query the order entry system for the first question, but engaging in the next two can be a positively terrifying experience. Peering into the future requires examining pipelines and forecasts, which are often based on judgment calls that are notorious for their incomplete nature, subjective basis and questionable reliability.
Pinpointing root causes relies much more on what we refer to as the “experiential database,” or a series of assumptions, anecdotal evidence, political positioning and guesswork. While this may work when sales is humming along and making plan, it usually is called into question when the train runs off the track.
A best-in-class sales metrics framework is built on the understanding that while sales will always have its intangible attributes, crossing results with consistent, process-based, management reinforced measures of opportunities and productivity provides greater insight into what will happen, why and perhaps most important, what can and should be done to improve.
THE SIRIUS SALES METRICS FRAMEWORK
Our sales metrics framework is built on a solid foundation that allows for a comparatively dispassionate, unbiased view of sales and selling. The first component of the foundation is metric categories, which include:
- Operational. As the starting point for sales, operational metrics examine sales’ cost structure, including personnel, travel and entertainment, and program expense. This category also encompasses headcount data including open territories, man months, turnover (both forced and voluntary) and time to performance for new hires. Expense-related metrics are typically extracted from finance systems; headcount, from human resources systems.
- Results. This category comprises sales achievement, or absolute contribution for external financial reporting; and sales performance, which tracks the attainment of quota. Sourcing these metrics usually requires the help of corporate financial, performance management, and incentive compensation systems.
- Opportunity. Our third category measures both demand creation and sales cycle data, basically the tracking of opportunities through their lifecycle. Individual opportunity data (revenue, products, sales phase and close date) is aggregated into the sales pipeline, with forecasts generated from subsets of pipeline data weighed against anticipated close dates. These metrics generally are sourced through the opportunity management module of a sales force automation system.
- Productivity. This final category is exceptionally powerful in answering the question of why things are happening as they are, as it measures both the efficiency (time and effort) and effectiveness (quality and relevance) of selling. Not only does it examine the volume, velocity and deal size of active opportunities, it measures the number of critical sales activities completed and the competency of salespeople to complete them in a quality manner. Organizations capturing metrics in this category generally use a combination of sales force automation systems and sales productivity systems that can manage attributes including training, knowledge and tasks.
Like this article? See the rest of the research brief from SiriusDecisions on Domo’s Learn Center, here.