Better Performance

How do you Manage Performance?

Can you identify and correct small problems before they grow into large ones?

Can you develop and grow your team while you meet or exceed your revenue goals?

Managing sales performance is a combination of art and science.  Every sales executive carries and instinctive picture of what is happening as the sales organization produces revenue.  However, that picture is not always as clear or as precise as it needs to be in order to make important decisions about people or the latest critical sales transaction.  Furthermore, every sales team (and growing company) feels the pressure of meeting or exceeding sales goals throughout the year.  Many leadership teams spend the last week of a sales quarter fully engaged in last-minute selling activity in order to make the quarter’s numbers.

The quarterly pressure will not go away.  However, there are many things you can do to keep your team operating at peak performance while identifying and correcting revenue gaps and personnel issues before they become serious.  By minimizing surprises in either revenue production or personnel performance, you can decrease the “Quarterly Fire Drill” and cut it down to size.  Steps you can take include:




Monitor Sales Productivity and Hiring Progress

Your company’s sales plan contains several important assumptions about sales capacity and productivity.  Are they holding true or have they changed?  What can be done about any changes that have taken place?  Here are some of the key assumptions that you need to examine:

Is your sales productivity meeting expectations among your existing people?

Have you been able to hire new people on-time and get them productive?

Is your average sale amount, sales cycle yield, and sales cycle length tracking to your plan?

Let’s Look at the following example:



2008 Sales Plan with Annual Projection based on Actual Performance


The future projection above takes the original sales plan productivity assumptions and compares the plan with the actual YTD productivity that the company has achieved.  You can see that sales productivity has lagged behind the plan.  If this were to continue without any adjustments, the company would experience a shortfall of over $6.0m in revenue and $5.0m in contribution.  If you analyze the variances by sales rep or region, you can often determine what the problems are that need action while you have time to impact the result.

Now, let’s take a look at the monthly impact of these changes in productivity:


2008 Sales Plan with Monthly Projection based on Actual Performance


With a different graphical projection, we are now showing the monthly variance in planned revenue and actual revenue based on our updated sales assumptions.  A drill-down into the assumptions by head count will pinpoint the areas that need attention and correction.

Delayed hiring plans

Delayed hiring plans are a hidden source of lost revenue.  Here is an example that illustrates the impact on performance when hiring plans slip (as they inevitably do):


2008 Sales Plan for New Hires with “what-if” projection based on Hiring Delay


This example shows the impact of a hiring delay of 60 days for 5 new hires out of the planned 20 new hires for the year.  In this case, expected revenue will be decreased by close to $1.0m.  A delay in hiring for 10 people cost the company $2.0m in revenue for the year (and less productivity next year).  Depending on your pool of available candidates and other factors, you may want to consider accelerating other new hires to make up the deficit for this sales year.  This highlights a critical issue in building rapid growth companies - there is tension between hiring a person according to plan and hiring the “best” or “right” person.  Senior Management should always be in the mode of networking to identify candidates well in advance of the company’s need for them.




Operational Cadence and Pipeline Review

Meet with the sales team on a regular basis - preferably each week at the same time.  While this sounds like an obvious suggestion, it is surprising how many small companies fail to do this with discipline and commitment.  Why every week?  Because you need to be in frequent, structured contact.  Why at the same time?  So that your sales team can have predictability in their schedule as they seek to meet with prospects, customers, partners during the rest of their schedule.  Keep it short and businesslike, no longer than 1 hour if possible.  Have pipeline updates submitted the day before to help keep the meeting focused on exceptions, highlights, and questions.  There are three major goals you are trying to fulfill while doing pipeline reviews: get the information you need to understand short-term and mid-term revenue production, develop quality relationships within your sales team, and develop an awareness of what is happening on the “front lines” in your customers, prospects, market, and industry.

Develop quality relationships by encouraging participation and brainstorming.  Again, this sounds obvious, but is surprising how little it is done.  Sales is a creative profession and it is surprising how one good idea from a colleague can help a sales person “break through” and make dramatic progress with a particular sale or partnership.  This is an excellent time to share knowledge that helps improve sales effectiveness for the entire team.  All too often, reviews are conducted in such a way that each salesperson simply gives their highlights to sales leadership, answers a few questions, and that’s it.  Each company has its own culture which will determine exactly how this is done.  You will see the first signs of what is happening in your market materialize in the week-to-week progress of your company’s pipeline.  Changes in pipeline activity reveal competitive threats, pricing pressure, changes in customer buying preferences and other strategic issues.




Analyze Pipeline Activity to Drive Revenue and Manage People

As you analyze transactions and history you should look at the following issues: How much is in the pipeline?  Is there enough in the pipeline to deliver the planned revenue in the planned timeframe?  What should the pipeline look like in order to achieve the revenue plan?  How has it changed since last week?  Since last month?  What are the significant closes, additions, and slippages?  What is your organization’s win/loss rate?    What transactions need high-priority help or resources?  Do I trust the credibility of the information I am looking at?

You can gain many insights from looking at pipeline metrics such as the overall sales cycle yield, the close rate for presentations given, the close rate for proposals made, the change in deal size.

What is your Sales Pipeline really worth? And when?

A simple pipeline graphic available in most CRM systems will tell you the number of transactions and their estimated revenue that exist in the pipeline at each stage of your company’s sales cycle.  While this is useful, it is far more valuable to know what the pipeline is likely to produce in revenue, when the revenue will occur, and how it compares to your sales plan.  Here is an example:


Company Expected Revenue Compared to Plan for the next 120+ Days


This screen shot shows the company’s active pipeline and then calculates how much revenue the company can expect to receive from the pipeline over the next 120+ days.  It then compares this revenue to the company’s revenue plan to show future revenue shortfalls or surpluses.  There are several important concepts at work here.  First, Sales Cycle Yield is the actual probability of a sale as it progresses through the sales cycle - this is calculated for each sales person and for the company.  Sales Cycle Yield is distinctly different (and more difficult to track) than tracking the distribution of current sales opportunities across different steps of the sales cycle as shown in the Active Pipeline.  Second, Sales Cycle Length tracks and calculates the actual length for each step in the sales cycle by each sales person and for the company as a whole.

Once the Sales Cycle Yield and Sales Cycle Length are known, they can be used to calculate how many opportunities from the active pipeline are likely to close and when they are likely to close.  This analysis is shown in the upper left graphic, “Forecast Revenue vs. Plan”.  Here the expected revenue from the pipeline is shown over the next 132 days and compared to the sales plan.  Furthermore, there is an added “historical yield” line that calculates the revenue from each expected sale using each sales person’s historical average sales amount, not the transaction amount in their sales forecast.  A wide difference between historical yield and forecast amount indicates that your sales team is relying on larger deals than they typically handle to meet their numbers.  This is important for forecasting purposes and sales coaching purposes.

At a corporate level, this example shows cause for concern.  While the short-term revenue projection is promising, there is a potential gap in revenue 90 to 120 days out.  To make matters worse, The revenue potential 90 to 120 days out is dependent on the sales team closing deals that are larger (and have more risk) than their historical comfort zone.

This same analysis can be invaluable when applied on an individual or regional level:


Sales Rep Expected Revenue Compared to Plan for the next 120+ Days


For this particular sales person, this analysis shows that she is in good shape in the short term but some exposure 90 days out and beyond.  It is important to watch her conversion of sales opportunities from the beginning of the sales cycle because this will be needed to make her revenue goals in 90 to 120 days out and she does not have an excess of other opportunities in her pipeline to make up the difference needed to meet her revenue goal.

How full should your pipeline be in order to meet your revenue plan?

While it is important to know much revenue you can expect from your current pipeline, another useful twist of the same general analytic technique is to calculate what the sales activity in your pipeline should look like at every step in the sales cycle in order to meet your sales objectives.  You can then compare this “ideal” view of your pipeline with the actual pipeline activity to get a sense of where you have activity gaps that need to be filled.  If you sell in an enterprise marketplace with a typical 6-9 month sales cycle, this method can give you very early warning of potential revenue shorftalls occurring in the future while you have ample time to take corrective action.

Here is an example of an activity level projection for the entire company:


Corporate Pipeline Needed in Order to Achieve Sales Plan


This analysis shows what the company’s pipeline needs to look like at every step of the sales cycle for each month of the sales year.  This was derived by taking the revenue plan for each month and calculating how far in advance the company needed enough sales activity given its Sales Cycle Yield and Sales Cycle Length in order to produce enough closed sales.  This is a very powerful technique that creates a tangible sales activity level target to help integrate the company’s sales and marketing efforts and provide easy comparison to actual sales activity for easy measurement and action.

This same technique is also invaluable when managing individual sales people or sales regions.  Here is an example:


Individual Pipeline Needed in Order to Achieve Sales Plan


This analysis shows the same pipeline calculations as above but for an individual salesperson’s sales cycle yield, sales cycle length, and average sales amount.  This is a powerful coaching and management tool.  Every sales executive know instinctively that certain individuals are better prospectors, closers, etc.  With this technique, both management and the salesperson know what they have to achieve in activity level to be successful.  And they know it with enough advance notice to have a positive impact on the result.  This provides a clear metric to explore coaching issues with needed activity at every stage of the sales cycle.

IBM performed a study on the leading practices of best-in-class sales organizations worldwide and identified the traits that characterize best-in-class performance.  These practices combined with the analytic techniques discussed here can jump-start your organization’s to predictably and reliably grow revenue.


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