Do You Really Understand Your Numbers?

As sales people and managers, we are often obsessed with the “numbers.”  There are constant review of pipelines and forecasts.  Some look at the daily and weekly activity metrics.  Everyone is focused on quota performance.

In order to maximize our performance this week, this month, this quarter, this year, and year after year, we need to understand the numbers that impact performance and our success over time.  I’m amazed by the number of sales people and managers that really don’t understand their numbers, or how various metrics interrelate.

It’s impossible to look at all aspects of numbers, but let me give a start so you can think about the numbers most important for you.

Business Management Numbers:

Let’s start with one number we all care about–the goal.  Our quota, our target, whatever we call it, it’s the number we have to achieve this year.  This is a critical number, but too often misunderstood and misapplied.  Often, it’s the primary number we or management uses to manage performance.  Yet it’s probably the worst number we can use.  Our quota performance, year to date, is a trailing metric.  So it’s pretty useless in helping us maximize performance.

It’s confusing, so let me give an example.  Let’s say we have a 90 day sales cycle.  We’ve hit the end of the month, we look at quota attainment and see that we are really behind our number.  Let’s also say that we immediately understand the problem, we can immediately put the solution in place.  Since we have a 90 day sales cycle, there is going to be a very long lag in the time it takes us to see consistent, systemic improvement in performance.  Yes, we might be able to correct certain deals in process, but it will take at least 90 days to see consistent performance improvement.  And that’s if we know the problem and can put a solution in place immediately.  Usually it takes us some time, so you can see the real problem with managing just by looking at quota performance.  The lag time for improvement to take place is unacceptable.

So quota or target, while an important number, is really a bad number for managing performance.  It presents a trailing or historical perspective of what we are achieving.

Operational Management Numbers:

To get around the challenge of trailing or historical numbers, we want to focus on metrics that are more current,  we want to focus on leading metrics.  These are the measures of what we are doing today, this week, or this month.  They focus on current activities and measures, but to be useful we have to know how they tie to our business management metrics.  We have to know that doing this many of these things today (and doing them well), we are likely to produce these outcomes in a few months.

For example, I know that I have to have a certain number of prospecting conversations this week.  If I don’t make my goal, it puts my quota attainment in 12-15 months at risk.  We know how our weekly prospecting calls (sharply executed) impact our goals.  We know the timing of that impact (roughly) and we know the volume we need to make.   We’ve done this by analyzing our funnel and prospecting performance over many years.  As a result, we know a lot about how what we do this week impacts our goal attainment next year, so those become key operational metrics for us.

Pipeline metrics are examples operational metrics.  If we know the number of deals we have to be working on, the necessary flow, average transaction value and win rate; we can have a very good indicator of whether we hit our number or not.  There are other metrics we can use as well.  Some are activity related metrics, for example the number of prospecting calls, the number of customer meetings, the number of proposals, and so forth.

It’s also important that we can play games with these metrics.  For instance, if we are required to make a certain number of calls per day, it’s actually pretty easy to do that.  But if they are bad quality calls, they won’t produce the outcomes we expect.  This starts a vicious circle, in this case escalating call expectations.  So if leading metrics are to work effectively, we have to constantly make sure we are executing them expertly, not just going through the motions.

So leading metrics are critical for us to understand.  They give us the time to identify problems and take corrective action, improving our abilities to make the number.  If you have a good handle on leading metrics, you probably will have a good handle on the things, at least tactically.  (As a sidenote, I’m amazed at how few sales people and managers really understand this).

Strategic Initiatives: 

There are all sorts of other numbers we may track–customer retention, new customer acquisition, product mix, win/loss, channel performance, and other things.  We may have account and territory goals/metrics.  We may have market penetration/share goals.  Some of these can be leading some can be historic.  All are helpful in making sure we are executing the organization’s strategy in growing the business.

Organizational Performance Numbers:

So far, I’ve focused on metrics that are usually applied at an individual level, then rolled up for various organizational perspectives.

But for managers, there are other critical organizational performance numbers and metrics for managers to understand.  Some of these are productivity and cost of selling numbers.   Things like Reps making Quota, Cost Per Order Dollar (CPOD), expenses, and others are important to leaders looking at the overall productivity of the sales organization and cost measures.  Managers may look at a number of other things that may link to effectiveness, efficiency or developmental measures.  These may be training metrics, certification, CRM compliance (ugh), or other indicators.

There are people measures, including voluntary/involuntary attrition, hiring/onboarding metrics, various performance planning/development metrics, even employee satisfaction measures.

Some of these are shorter term, some are longer term, but they tend to look at the overall performance and health of the organizations in terms beyond just revenue.  Many of these are critical measures for managerial performance.  As an example, in one of my very first sales management jobs, employee satisfaction was a critical indicator of my own performance as a manager.

I won’t go through all of these, I just want to highlight them as numbers critical for managers to understand.  Some are leading, some are trailing.  They are less focused on individual performance—except where they are being used to measure  the jobs managers are doing.

Performance And Other Analytics:

But there are a lot of other things that are important.  We have to look at our historical performance and trends in that performance.  Here’s where a lot of sales analytic tools can really help us see patterns in performance over time, or across different segments of the organization.

But if we don’t have the latest greatest analytic tools, even simple Excel spread sheets [Learn how to use pivot tables, let functions like SUMIFS, COUNTIFS, FREQUENCY, IF…. become your friends].  Look at trends in what you are selling–product categories, deal sizes and so forth.   Are you good at specific types or sizes of deals, deficient in others?  Look at who you are selling to–current customers, new customers, what segments/industries, customer size, characteristics, decision-makers within customers.  Look at customer churn, retention, new customer development.  Look at who’s selling what to who.  What trends/issues do we see in partner performance?  Where are we spending our money, what has most impact?  What are the productivity trends with sales people?  Understand why you win and lose–not to assign blame but to look at patterns–do you tend to lose against a certain competitor, do you compete badly with certain customer types, are you winning in some markets, losing in others.  Drill down into the numbers to understand the reasons.  Use them to go talk to customers to understand further.

There is Gold in these analyses.  They aren’t difficult, they don’t take much time.  It may  seem daunting at first, but even with Excel, it can be illuminating.  As an example, a few days ago, I sat down with a client.  We looked at 15K deals over several years.  We weren’t looking at the specific deals themselves, but we were looking for win/loss trends in deal size, product mix, customer type, region, competitor, and customer churn/growth.  It took a couple of hours, but we had tons of data to really help us understand some disturbing trends and critical issues.  They have a lot more work to do.  They have to look at the underlying issues.  Some of this requires interviewing some customers, sales people and so on, but now they have some performance insights they never would have had by just monitoring current quota performance.

Conclusion:

So maximizing sales performance, both this month, this quarter, this year–and looking at future years means we have to really understand our numbers across a lot of dimensions.  For manager in particular, developing a very deep and rich view of the numbers is critical to sustained performance.  In larger organizations, we are seeing very sophisticated capabilities being developed in the Sales Operations functions.  But even of you don’t have that function, look at numbers and performance across all the categories I’ve defined.

Know the critical numbers for each week.  Know the numbers that lead you to achieving your goals.  Know the numbers that look at overall organizational performance, effectiveness and efficiency.  Look at longer term trends.  Slice and dice the numbers across a number of dimensions–you’ll be amazed at what you discover.

There’s much more to this discussion, so I’ll be extending it over the coming weeks.  On some of the more tactically or individually oriented metrics, I’ve addressed many in my Performance Metric Friday series, so review some of those.

I haven’t attempted to cover everything, and certainly not at any depth.  But it’s a starting point to think about.