There’s a sleuth of metrics that sales managers use to evaluate sales performance, some more important than others. Now more than ever, sales managers should be working on improving their sales evaluation process. Quota attainment has been on a downward trend for the last five years, and it’s now at only 53% (Miller Heiman statistics).
This percentage has steadily decreased from 63% over the last 5 years, and it’s showing not only a skill gap for sales reps, but a lack of sales coaching and training that is directed towards improving results.
Not only is this hurting companies’ bottom line, it’s leading to high turnover in the industry. The average tenure for a sales rep is only 24 months, and 26 percent of sales reps quit because of missing quota, shows research from DePaul University in Chicago.
So, why aren’t more sales reps hitting quota?
Why Sales Is Broken and Technology Won’t Fix It…
There’s a few indicators that show the changes that are happening in the sales industry, and the answer seems to lie in a combination of factors. Systems, people and processes need to all work seamlessly for salespeople to reach success, and this is not happening.
Sales reps are not spending their time selling
This might come as a shocker, but sales reps spend less than half of their day actually selling. Sales reps spend only 36 percent of their day selling, show the “Time Management for Sales Reps” study from InsideSales.com.
The struggle is real, as the study shows sales reps spend around 12% of their day on internal policies and approval. They spend another 15.7% on meetings and customer interaction. They also spend another 12% on researching target accounts and contacts. This means a majority of their day (about 64 percent) is taken up by activities that simply don’t generate revenue…
Time spent in the Customer Relationship Management (CRM) is going down
While almost all companies who employ sales professionals today use a CRM, adoption among sales reps is not ideal. Sales reps today spend only 18.0% of their time in CRM, the foundational system for sales teams.
Because of the inefficiency of CRM, sales reps report that they spend 9.7% of their time (over half the amount of time spent in CRM) in spreadsheets. Basically, they are trying to more effectively manage CRM related tasks.
Sales acceleration technologies are coming in to fill the gap, being the sales systems rated most effective by sales reps. These systems offer insights on customer behavior which are not always readily available in the CRM.
Sales reps are not having meaningful conversations anymore
One concerning trends is that sales representatives are no longer as effective at having meaningful conversations with their prospects anymore. Sales reps now prefer contacting leads via email rather than having phone conversations. This makes them less effective at establishing a relationship.
Over half (61 percent) of first contacts between sales reps and leads now happen via email. Email is now the most common outreach practice (32 respondents say they use this sales communication method). Other data shows that when sales reps focus on calling rather than emailing, they have 15% more meaningful conversations.
“Phone calls result in much stronger sales conversations than email,” shows Martin Moran, International Managing Director for InsideSales.com.”Reps voice a preference for email, but the email focus has only hurt their results. I expect the pendulum to swing back to phone in the US as companies begin to recognize the decrease in results,” added Moran.
Kenneth Krogue, President and co-founder of InsideSales.com, describes 12 metrics you should measure for sales performance in the whitepaper “12 High Velocity Metrics That Actually Increase Results.”
And the first thing on the list is response time: how fast does your team respond to leads (immediacy).
Not using sales acceleration technology
In recent research from DePaul University, we see that over half of companies are using sales acceleration technology, with positive results. “Firms in the study reporting the use of at least one type of sales acceleration technology compared to those not using any, on average, had higher performance respective of sales growth, meeting/exceeding quota achievement, and turnover,” show study authors.
While implementing sales acceleration technologies can certainly help performance, it is not enough for improving sales performance.
“Sales representatives – especially millennials – won’t adopt a technology if they don’t understand how it helps them and why they should use it. What’s in it for me – this has to be very clear to them,” said Gabe Larsen, VP of InsideSales Labs.
Inbound leads are not getting enough attention
We never saw this one coming, but there’s actually a debate out there on whether you should respond immediately to inbound leads or not. Sales reps report to have around 12 to 15 touches (attempt to contact) per lead. Meanwhile, the reality is they have only 4 touches per lead. So there is a huge difference between what reps ‘think’ they are doing, compared to what they are actually doing.
Most companies don’t have a properly tested sales cadence for lead response, which results in lost opportunity. Moreover, in the study, 40 percent of leads never got a response at all.
What Metrics Should I Use For Measuring Sales Performance?
Sales teams will use different metrics for evaluating sales performance based on their industry, company size, market characteristics or product. However, there are a few metrics which can accurately describe how sales reps are doing – even compared to past performance.
The Sales Metrics That Matter Most – HBR Study
According to Harvard Business Review study “12 Sales Metrics That Matter Most”, quota metrics are among the top key performance indicators that sales managers must track to measure their teams’ performance.
Average quota attainment, % of organization reaching quota,quota attainment average and average annual quotas for field and inside sales reps are in the top five metrics in this study.
The HBR study also lists metrics relating to sales cycle, sales vertical adoption, SMB specialization and different metrics that are role-specific (inside sales versus field sales).
Using Revenue As a Key Performance Indicator
Having different metrics by sales specialization is a great strategy to increase accuracy of your results. Research shows that some companies are using revenue as a metric for judging sales development reps performance. Commonly, sales development reps build pipeline. Number of appointments set is usually how sales managers measure their performance.
“In this study, we had some companies report that they are using revenue to measure results of SDRs. That was the number one factor that was utilized in the variable portion of sales development reps, and I am surprised about that,” said Gabe Larsen, VP of InsideSales Labs, on the Playmakers Podcast.
“Variable compensation should connect to metrics that you feel you can own, that you can actively influence. Sales development representatives have an influence on revenue, but it’s an indirect one and not as much as the account executives,” added Gabe Larsen.
Conducting a Sales Effectiveness Assessment
To conduct a sales effectiveness assessment, sales leaders need to pick metrics relevant to their organization, product and sales process. They need to find out what are the sales methods and processes they are using to win their deals, and then teach these methods to lower performing reps.
Sales Effectiveness Training
InsideSales.com experiments have shown that leadership activities of coaching and mentoring, and even sales team training courses will positively impact the growth and retention of top performers. Moving just 15% of lower-performing reps up into higher performing quadrants, the revenue impact can be significant for organizations.
Ron Hollis, Sales Effectiveness Consultant at InsideSales.com, advises organizations to use a scientific method in trying to identify their top salespeople and making sure their process is known repeated throughout the company. Rather than removing low performing sales reps, it’s less costly and more efficient to coach them and help them improve.
“I think sometimes identifying the problem is often the problem. If you look at health care, people don’t just go, ‘Hey, my hip hurts. I’m going to get a hip replacement.’ They actually go in and they talk to the physician. They will pick one that has done surgeries before. He probably has a pretty good track record and he knows the best method to do so. He has a fellowship team, which means they really studied this,” said Ron.
Who Are Your Top Performing Sales Reps?
According to the Sales Effectiveness Quadrant from InsideSales.com, there are two main sales skills that matter for sales performance. These are pipeline generation and closing skills. According to how well they do, sales reps can be:
Top Performers – sales professionals with lead generating skills as well as closing skills
Deal Makers – sales professionals who excel at closing deals, but are lacking in lead generation abilities
Pipeline Builders – sales reps who specialize in pipeline generation, however lack the ability to close
Underperformers – sales reps who are lacking skills in both pipeline generation and closing sales deals.
It’s important to note that this is not a traditional pyramid of sales performance. While some sales reps might have excellent pipeline building skills, they may not exceed at closing deals. This doesn’t make them less valuable to an organization.
Here’s a few of the key performance indicators you can use to gauge the health of your sales organization:
|Pipeline Metrics||Quota Attainment Metrics|
|Pipeline coverage – Do I have enough pipeline for me to achieve and exceed yearly quota?||Win ratio – the percentage of opportunities won|
|Sales activities – On average, how many activities are tied to an opportunity?||Opportunity Health – average risk of open opportunities based on push, activity, and velocity risk, engagement depth. Sales methodology alignment|
|Deals opened and closed in the same quarter – How many closed won opportunities were opened and closed in the same quarter?||Deal Size – Average opportunity amount of closed won deals|
|Pipeline Replacement – are there enough newly created opportunities to replace closed opportunities by quarter?||Sales Cycle – average length of time to close win an opportunity|
|Forecast accuracy – how close or far is the day 10 Forecast per quarter from actual Closed won at quarter-end? Is the rep closing deals forecasted versus revenue forecasted?|
Looking at the skills for the best performing sales reps and figuring out the process they are using to close deals and attain quota will help you disseminate this information throughout the company and move the lower performing sales reps up in the ranks.