This blog post is extracted from the SiriusDecisions Research Brief “The Measuring Sticks of Sales Productivity.” Get the full article for free on the Domo Learn Center.
The world is flat, or at least we thought it was until Columbus made a discovery or two while trying to find a faster route to the Far East. In many organizations, sales executives take the same myopic view of sales productivity, refusing to treat it as anything but the ratio of expense to revenue. Not surprisingly, their search across oceans of data generated by finance, human resources and sales force automation systems to find a new world of results can’t ever seem to find dry land.
Measuring sales is easy; it’s measuring selling that presents a challenge. In our research brief “Productivity: More Than Just the Topline,” we looked at how traditional performance metrics are often confused with measures of productivity. In this brief, we will define a more complete framework of metrics that drive a better understanding of sales performance and how to improve it.
A matrix of metrics.
Measuring sales exclusively on results and the underlying cost structure is certainly a clean approach, but forces sales leaders to rely on intuition as to how to improve sales performance. Is more training required? Do we know our products well enough? What is marketing’s contribution? Where can technology save time or improve the quality of output?
A metrics framework that incorporates a balanced view of sales and selling, on the other hand, provides decision-makers with a dashboard of financial facts (what we know) and field intelligence (what we think). We segment this framework into four categories:
- Operations – The operations category measures how the sales organization is engaging with the marketplace in terms of expense, headcount and infrastructure.
- Performance – The performance category tells us how we have done in terms of revenue, quota attainment and product contribution.
- Opportunity – The opportunity category provides perspective on individual opportunities as they move through a lifecycle.
- Productivity – This category shows us how efficient and effective we are at advancing these opportunities.
By putting these categories together, we now have a “matrix of metrics” that can be sorted and viewed by a variety of demographics including geography, product group and customer market for relevance. This matrix allows sales executives not only to pick apart their results, but to troubleshoot the difficulties of their teams and take the proper action.
The presence of the opportunity category in our metrics framework cannot be overlooked; it forms the foundation on which productivity can be measured. Classifying opportunities requires an institutional understanding of a well-defined sales process; at a minimum, opportunities should be classified by sales stage, product mix, revenue value and anticipated close date. More advanced sales organizations will capture intelligence such as source (lead, campaign, referral, cold call), competitive presence (pricing, products, messaging), buying roles (decision-maker, influencer, user, ratifier) and decision factors (business requirements, budgets, signing authority), all of which lead to a deeper knowledge of buying behaviors and cycles.
Although sales force automation systems have been deployed to automate the collection and calculation of opportunities in the form of pipelines and forecasts…
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