“Well duuuuuh Dave, what a stupid question, isn’t easy to tell? After all, isn’t easy to tell, we’re either hitting our numbers or not?”
Hitting the number is how we tend to measure sales performance, but it’s really a terrible indicator of whether the organization is performing to the highest level possible. Hitting the number only tells you that you’ve hit the number–but it tells you little about performance.
Let’s look at some real examples I’ve encountered in the past few years:
- Perhaps arrogantly, I called a sales executive of a large company and suggested his sales team had a performance problem. I wanted to meet to discuss it and how it might be addressed. The executive came back to me saying the team was consistently hitting it’s goals, he didn’t believe there was a performance issue at all, and was a little offended with my suggestion. But when I pointed out, his competitors were growing faster in the same markets and, in fact, his organization was losing share, he became alarmed. After some discussion, he came to realize the organization was really under-performing.
- Several years ago, I worked with a CEO who was appropriately concerned about his sales team’s performance. They were growing wildly, exceeding their numbers, but they had a customer loyalty or retention problem. They had, like many organizations, an 80-20 distribution of their revenues. In fact, every year 100 customers represented about 80% of their revenues–but when you looked year over year at those the 100 customers, every year there were 70 different names in those 100! They had an enormous customer retention problem! They were great at acquiring customers, but they couldn’t keep them! Imagine how they could grow if they could retain those top customers and complement it with their ability to acquire new customers.
- There’s the organization that was making their number–but struggling. The senior executive was talking to me, do we need to train our sales people? Do they need to improve their skills. Upon investigation, we found a different problem—67% of their sales people were leaving the company within a year of being hired. We started measuring the impact of that employee churn, we discovered between open territories, customer confusion about who their sales person was, and a few other things—the impact of this churn was costing them over $300M a year in lost revenue. They didn’t have a general performance issue, but they had a major challenge in hiring the right people, onboarding them, and helping them become successful as quickly as possible.
- Another organization was handily making it’s numbers. The sales people were achieving their goals. But at the corporate level, there was tremendous concern. The executives of this company recognized their business was shifting from a hardware centric business to a software and service centric business. They had established several new divisions, strictly focused on bringing new software and services products to the market. These were viewed to be core to their future, as the hardware business declined. However, the CEO was faced with shutting down those groups. The problem was, the sales people weren’t selling the new software and services products, they were selling what they knew and were comfortable with, the old hardware products. The entire company business strategy was at risk, yet the sales people were making their numbers.
- Finally, another organization was hitting its numbers—struggling, but hitting them. The problem was, they could only win by deeply discounting. Their margins were plummeting, they weren’t generating sufficient levels of profit to sustain the business over the long term. Soon the organization would fail.
I could go on. There are countless examples we can think of where sales organizations may be making the number but under performing. But in just these three examples, there were completely different issues impacting performance. The key metric. quota/revenue performance was masking serious performance and competitiveness issues. The focus on quota and revenue performance, the fact they were meeting their revenue targets prevented executives from seeing serious underlying problems–threatening the sustained viability of their companies.
To be able to answer the question of whether our sales organization is under performing, we have to have a rich understanding of what performance is, as well as a set of metrics by which to evaluate performance. Quota attainment alone is an insufficient measure of performance and success.
First, we have to look at the overall strategy of our companies. Is what we do, is our performance aligned with the strategy of our company? If our company has a strategy to shift from a certain set of products and solutions, are we setting performance objectives that are aligned with the shift in strategy and measuring our performance against those objectives. We do our companies a disservice by not aligning our objectives to support the overall priorities and growth strategies for the organization.
Second, we have to benchmark our performance against others–not just our competition, but against other types of sales organizations. We should seek to look at a rich set of measures to compare what we are doing to top performers and best in class. We should strive to set objectives that enable us to outperform those organizations.
Third (actually maybe first), we have to understand the fundamentals of performance, we have to understand what performance really means. It’s not just about achieving our quotas. There are many other dimensions to performance. A short list includes, are we maximizing our customer retention, are we maximizing our share of customers, are we creating rabid fans who will refer us out of enthusiasm for our solutions not out of doing us a favor, are we maximizing our share of market, are we delivering customer success, are we having each person in the organization perform and contribute to their full potential, are we improving productivity, effectiveness and efficiency, are we reducing our costs of selling, are we maximizing our profitability in each deal…… I can go on.
Knowing whether our organizations are performing well or under performing is actually difficult. In good times, in healthy economies, sometimes we succeed in spite of what we are doing, and are blind to understanding performance issues. In bad times, it’s harder to hide performance issues, but still the excessive focus on quota and revenue targets can create great challenges.
Sales executives and leaders must constantly ask the question “Are we performing to our full potential?” Top sales people must challenge themselves, “Am I performing to my full potential?” Making the number is an insufficient answer to each of those questions. We have to have richer sets of criteria to really be able to understand and answer the issue of whether we are top performers.