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[Message to Management]: Are Your Sales Metrics Messed Up?

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metricsSet metrics around sales activities you can measure and coach.

“Revenue is the only metric that matters.” Somebody actually wrote that in a recent blog post. If that’s how this person manages his team, I’m glad I’m not one of his reps.

Sure, revenue is our goal in sales. Beating our numbers is our passion, and getting to Club is our reward. But revenue is a lagging indicator. We can measure revenue, but we can’t manage it. We can, however, measure and manage the key sales activities and behaviors that drive revenue.

Some execs promote giving reps a quota and letting them figure out the activities that will help them meet it. Bad idea! Not only does this strategy let sales leaders off the hook for coaching and training salespeople—which is their No. 1 job—but it also puts sales teams in the position to compete with each other, when they should be collaborating.

Sales is no longer a lone ranger business. That went out last century.

The Lone Ranger Rides No More

In the past, when salespeople called on accounts, they walked in a client’s front door, and all decisions were made under one roof. Today a system is built in one part of the world, implemented in another, and marketed in another. The selling process has become more complex, and we need to understand the needs and wants of people around the globe.

This requires a shift in metrics, and in the seller’s mindset.

Salespeople of old were mostly lone rangers. They viewed data as power and didn’t share information. They had their zip codes to call on, and they did so alone. Now salespeople often depend on getting relevant client information from colleagues in multiple locations around the globe. This means we must trust our teammates, and they need to trust us. When we share data, account strategies, and best practices, everyone wins bigger—including the client, who gets a better solution. As one sales executive told me: “If you work as a lone ranger, you might close a million-dollar deal. But if you work as a global team, that could be a 20 million-dollar deal.”

If sales leaders don’t set clear goals for their teams and create environments where teamwork is rewarded, people will never trust each other, let alone collaborate.

But First …

Everyone on your sales team must understand, live, and breathe your sales strategy. If they don’t agree, don’t hire them in the first place. If people on your current team won’t get with the program, set them free to find a sales organization that’s still stuck in the Wild West.

Once everyone is on board with referral selling, set revenue goals for each person. Your veterans expect their goals to increase year-over-year, so there should be no surprises.

Now it’s time to set KPIs for activities and behaviors that drive revenue. The last thing you want is salespeople engaging in mindless activity.

The Sales Metrics That Matter

Setting the right KPIs is your biggest competitive differentiator. Measure the right sales activities, manage to those activities, and coach your reps on the behaviors that turn those activities into revenue.

Only 58.1 percent of sales reps made quota in 2014, according to the CSO Insights Sales Performance Optimization study. That’s 5 percent less than in 2012. But while quota achievement has been decreasing, revenue targets have been increasing. There’s a big problem here. Salespeople are failing to make quota in large numbers, but management continues to increase sales goals.

In the same report, almost half of sales execs said enhancing lead generation is their top initiative. Of course it is. But simply focusing on “lead generation” can take you down a rabbit hole of unproductive sales activities that result in a pipeline full of unqualified leads, most of which never pan out.

The key is to generate more qualified leads—the only leads that really count. The rest just waste salespeople’s time. So how do you fill your sales pipeline with nothing but hot, qualified leads? With referrals.

Referral selling is, hands down, your most effective and efficient prospecting strategy, because it addresses the two biggest challenges sales organizations face: getting every meeting at the level that counts and converting prospects into customers

KPIs for Referrals

Measuring referral activities is simple. Weekly metrics for each rep roll up into monthly and quarterly metrics. Measure the number of:

  • People asked each week
  • Referrals received
  • Meetings scheduled
  • Meetings conducted
  • Deals closed through referrals

More importantly, coach reps based on these activities. Keep your reps accountable and on track by asking specific questions, such as:

  • Who are the people you’ll ask for referrals? Get names
  • What are the outcomes you expect? Get metrics
  • What are your discussion topics? Get these in writing

Before reps meet with referred prospects, provide coaching tips and discuss the following:

  • What did you learn about the prospect from your Referral Source?
  • Have you checked out the prospect’s LinkedIn profile? What have you learned?
  • What are your other connections to this prospect?
  • What interests do you have in common?
  • How will you use this information in your meeting with the prospect?

When you measure and coach referral activities and behaviors, you don’t just meet your revenue goals. Your sales process shortens (time is money), your cost of sales decreases, and your competition disappears. Typically deal sizes are larger, and these clients willingly refer you to their networks.

Revenue isn’t the only metric that matters. Set metrics around sales activities you can measure and manage. Then adjust your KPIs to match. Want your reps to get more qualified leads? Put down that ice-cold phone. Set your referral course. Commit to referral selling as your primary outbound prospecting tool, build skills in referral selling, and coach and reinforce referral activities. It’s simple, but it’s not easy. However, referral introductions are your biggest competitive differentiation. Isn’t that a journey worth taking?

Do you have what it takes to lead your team to referral success? Take the Referral I.Q. Quiz to find out.

(This post originally appeared on LinkedIn Publisher.)

Connect with No More Cold Calling

Follow Joanne on Google+ or Twitter @ReferralSales, or connect on LinkedIn and Facebook.

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One Response to [Message to Management]: Are Your Sales Metrics Messed Up?

  1. Jim Horan says:

    Joanne,

    I love all of your articles on selling, I have been reading them for years. THIS ONE IS EXCEPTIONAL. You do an excellent job in demystifying sales metrics and then layout a straightforward, practical plan for how to coach our sales teams to achieve their numbers. If every sales professional, manager and executive would prepare themselves and their team by doing this, their sales will go one way… UP!

    Great Job… Thank You,
    Jim Horan
    President
    The One Page Business Plan
    (super fan of Joanne Black!)

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