Sales People Do What You Measure And Compensate Them To Do!

I’m sure there are some snarky reactions, “Well thanks for the insight Dave, I never knew that?#!”  Yeah, Yeah, we all know that, but here’s the real issue, “Are we measuring and compensating them to do the things we WANT them to do?”  That’s where things start falling apart.

My posts, Sometimes Revenue Is The Wrong Sales Metric and Conditions Of Employment have stirred a flood of comments and emails.  I thought I’d expand the discussion here.

Growing revenue, and profits, are key objectives of any organization.  Simplistically, we think of sales as responsible for driving revenue growth.  After all, our job is to sell–go out, win deals, get orders, grow the business—simple.

We need to look at things differently.  Sales job is to execute the company strategy in it’s chosen markets and with customers.  Growing revenue, growing profits are just elements of the overall corporate strategy.  If we focus our metrics on revenue, we will bias people to one component of the overall corporate strategy–but most likely fail to achieve the corporation’s goals.

We know metrics drive behaviors, always.  We choose the wrong metrics, sales people, goal directed as we expect them to be, will achieve those metrics.  They will do their jobs, we’ve just told them to do the wrong job.

If sales people aren’t executing the corporation’s strategies, don’t beat them up for not executing, look at the metrics.  Do you have metrics that are aligned with the corporate strategies?  Are you trying to grow share?  Do you want to penetrate new markets, do you want to attract new customers, do you want to retain and grow certain customers, do you want to drive growth in certain product areas?  All of these may be components of your corporate strategies.  But we need to make sure sales is aligned around the execution of the corporate strategies.  We do this by having the right metrics in place.

Metrics drive the behaviors we expect of sales people.  We leverage them to focus sales people on what we think is important and what we want them to do.  Getting the right metrics is, sometimes, a challenge–we may have seemingly conflicting goals (maybe we might not have the right strategies).  We have to be careful in assessing the metrics we develop.  We can’t overwhelm sales people with too many or metrics they can’t directly influence (Share price may be an important corporate goal, but we don’t want to bother sales people with this).

We have to be thoughtful, we have to focus on the few, critical metrics that align and drive the behaviors and performance we expect.  We have to give sales people the tools, coaching, processes, training to support them in sharp execution.

But there are still many saying, “But what about revenue!”  Revenue is important, we are accountable for it.  But if we understand what drives revenue, maybe by measuring those things, we can drive the right behaviors, achieving our strategic goals.  Revenue goals are, frankly the easy way out.  I’m tempted to say, it’s sloppy management—Oops, that slipped out!  If we can execute our corporate strategies, driving the right behaviors by simple revenue goals, then we have the right metric.  But too, often I find that to be insufficient.  We have to understand how our strategies drive revenue, and develop the key metrics around those.

If your sales people aren’t achieving their goals/metrics–it’s a performance issue.  Managers address this through coaching, development, training, and so forth.

If your sales people aren’t aligned with and executing the corporate strategies, it’s a measurement problem.  We have the wrong metrics in place.  That’s a management problem, not a sales person problem.