We measure a lot of stuff in sales. We have all sorts of pipeline metrics, activity metrics, prospecting metrics, account, territory, retention, renewal, mix, margin, and endless other metrics. We have an entire alphabet soup of metrics, including MQL, SQL, ARR, ACV, TCV, NPS, MRR, LTV, CAC, Churn, and XYZ (OK, I made that up—I think).
We couldn’t manager our personal or organizational performance, without metrics, though, I’ve observed we tend to have too many metrics, and those that we have, we too often misunderstand.
Metrics are really just some sort of alert. They can tell us, we are on target to meet our goals, we are ahead, or we are falling behind and will miss. In some sense, I like to think of them as “Red Flags.” When you see them, you know something off, something’s not working.
But metrics are very useful in helping us understand what’s wrong and what we should do about it—though far too many people believe this, which is why they so often do the wrong things.
Let’s imagine this thought experiment (regular readers will recognize this example, so don’t blurt out the answer).
Let’s imagine we have two sales people with very similar territories. Both have identical quotas, $5M. Both have $10M pipelines. Both have roughly the same average deal values and sales cycles. Shari has a win rate of 40%, Jim has a win rate of 20%.
Should you be worried about their performance? If you are, what corrective actions would you make?
85% of managers I pose this scenario to, roll their eyes. I know they are thinking “this old guy is way past his expiration date.” They say, “They have to prospect more!!! They need to build their pipelines, they need to get to 3X–they need to get to $15M!”
Then, I usually ask questions like, “Why 3X?”
By this time, many managers are about to leave. “Don’t you know we always have to have 3X coverage of our pipelines to make the number?”
Sometimes, if I’m feeling playful (or sadistic), I might ask, “Why?” (This just drives them crazy.)
Of course their pipeline’s are anemic. They need to build pipeline–but is that the highest leverage thing to focus on?
When we look at Shari, she’s a pretty good sales person. She has high average deal values and her win rate is 40%. She does need to prospect and build her pipeline. But if we force her to get to 3X, we may actually decrease her performance and productivity. She only needs a 2.5X pipeline. Diverting her to build a 3X pipeline may actually reduce the time she is spending on her qualified deals, reducing her win rate. So the best course of action is to coach her in developing the 2.5X pipeline.
That was an easy, obvious answer–but it usually is with great sales people.
At this point the managers are saying, “See she needs to prospect and build pipeline, that’s what we said. OK, she only needs 2.5X, what’s the big deal?”
Then we get to Jim. Jim’s a terrible sales person. His win rate is only 20%.
If we focus him on prospecting and coach him to get 3x pipeline–he still isn’t going to make his numbers. He needs at least 5X.
But is focusing on prospecting the right thing for Jim and for our business? Are we setting him up for failure, do we risk creating a huge negative brand image?
Jim, struggles with winning deals–with developing great deals strategies and executing them to win. If he is so bad at this, he is likely to be very bad at prospecting.
He will, inevitably, represent what we do and how we can help our customers poorly. He will miss opportunities, that Shari might have been able to qualify. He will have to churn through more prospects than normal, creating bad impressions with too many. All the time he has to find more prospects to build a 5X pipeline, which he will squander most of the opportunity.
So we are probably setting Jim up for failure, as well as adversely impacting our brands.
Perhaps, the most impactful thing we can do is coach him on how to improve his deal strategy development and execution. Improving these skills will also have an impact on his ability to prospect. It, also, dramatically changes the dynamics of his pipeline.
Metrics can be helpful—but sometimes aren’t. Metrics can be very powerful in helping us understand we may have a problem. But they don’t necessarily guide us to the most impactful solution to that problem. To do this, we have to dive into the situation, figuring out what’s going on and what we need to do about it.