It’s an age old adage, “You get what you measure and compensate for.”
If it were true, why do we have such a gap in sales quota performance? We’re measuring it, we’re tracking it, but the majority of sales people aren’t achieving their goals.
There are a lot of things that impact quota performance, but I suspect a large part of the challenge are the other things we measure, hold people accountable for, even compensate at some level. To often these are activity metrics which desk bound managers track, beating the crap out of those who don’t achieve them,
Too often, what we measure is the wrong thing–or we have the wrong goal in place for the metric. Let’s look at some examples:
Perhaps the most misused metric is “pipeline coverage.” I don’t know how many executives I speak to who say, “We require 3X pipeline coverage!” Well that’s great if you have a win rate of 33%. But if your win rate is 25%, you need 4 times coverage. Today, I spoke with an executive bragging about his coverage model, he was saying, “Everyone is right on their coverage with at least 3X coverage.” I responded, “Why are 85% of them at 75% YTD or less?” Turns out their win rate was significantly less than 33%. So while the people were achieving the coverage goal, they had the wrong coverage goal in place.
We see coverage misused so many ways. A few years ago, I was looking at the pipeline for another organization. Mathematically, they had achieved their coverage goal, it was well aligned with win rates, but they weren’t achieving the goals. The problem was 75% of the deals were stalled. There had been no activity and no movement in them for months. A coverage metric without paying attention to velocity is meaningless.
The final problem with having the wrong coverage metric is it is so gameable. 100% of your sales people should meet whatever reasonable or unreasonable coverage goal you set. You name it–3X, 5X, 10X–all are easily achievable. All you do is open your pipeline up to bad deals. I don’t know how many organizations with coverage goals in place have crappy pipelines. Hitting your coverage goals is meaningless if we don’t have the right deals in our pipeline. If the quality of the deals in the pipeline is low, then our pipelines regardless of the coverage won’t enable us to produce the results.
Dials, calls, and conversations are another set of gameable and potentially meaningless metrics. Particularly with today’s dialing technologies, there isn’t any dialing goal that a sales person can’t make. Make 100 dials a day—piece of cake. I’ll dial, let it ring long enough to log into our system, hang up and dial another number. In fact, if a person picks up the phone and actually engages you in a phone conversation, it slows you down. It makes it easier to hit your dial/call goal if those pesky customers just don’t answer their phones.
Likewise with conversations. Today alone, I’ve had 5 conversations with people prospecting me. I’d pick up the phone, the sales person would launch into their pitch, when they paused to take a breath, I’d interupt, “You are wasting my time, I have absolutely no interest in you, what you are selling, your company. Please make sure no one in your company calls me again.” Undoubtedly, each one of those people chalked up a conversation that helped them achieve their goals.
One final example. When I was starting in sales, my manager had the belief, “You need to be with your customers during business hours. If you are in the office, you aren’t with customers.” To motivate us to be with customers from 9-5, she put a $15 dollar a day fine on us if we were in the office during business hours. (She did make some exceptions, like bringing in orders, etc.).
My colleagues and I quickly figured things out. Yes, we tried to be with customers as much as possible, but we couldn’t be with them constantly. We finally decided, if it was going to cost us each $15, we might as well get something out of it. A bar down the street served $5 beers. We could spend great afternoons drinking beer and shooting the breeze. Alternatively, movies were about $10. We could go to a movie and had a little money leftover for popcorn.
I don’t think that was the behavior our manager was trying to drive, but it was the behavior that resulted because the metric/incentive was poorly thought out.
Too many sales people are drowning in meaningless goals and metrics. They’re driven to achieve them, usually through some sort of carrot/stick.
But meeting these goals isn’t creating the outcomes—ultimately quota attainment.
Most of the metrics I see sales managers inflicting on their sales people are meaningless. In many cases, people are achieving the activity goals, but not creating the business outcomes expected.
Leading metrics/goals are important. They help keep us on the path to achieving the business outcomes we want. But make sure you are setting the right metrics and goals. Make sure they are meaningful in producing what you intend to have produced. Make sure you can link their attainment to your ultimate goals–for example quota attainment. Understand the behaviors the metrics drive, understand how they might be gamed. Understand the quantity/volume/quality tradeoffs that will be made.
Ultimately, you’ll discover that very few metrics/goals will be needed, but the few critical ones, well implemented will drive stunning business outcomes.
Martin Frey says
I call this the salesforce.com effect. When the pipeline is measured as if it were a success metric the pipe gets filled with sewage and the real deals get buried. I ran into this at a SaaS company.
PS: in 1983 we had fines of $100 / day for being in the office from 9-5. We here paid straight commission as a percent of the gross profit and we have 100% pricing authority on all non-national account customers. Pipe, forecast, and quota where never a problem.