What You Need to Know About Sales Metrics
Salespeople are competitive!
To be successful, a salesperson must beat the competition and win deals. Many sales leaders take advantage of this competitive spirit by using sales metrics to rank their salespeople. They use rankings to recognize top performers and provide transparency to the rest of their team. While most sales leaders agree that there is value in ranking their team, they are not always sure which sales metrics to use.
This blog post recommends six ranking metrics and how to best manage them.
Ranking your sales team can be an excellent way to motivate and differentiate your team. For it to be effective, the ranking metrics must be clear, measurable, and fair.
To be clear, the sales team must know what metrics are used in the ranking and how much weight each carries.
The metrics should be measurable, so the salesperson can easily calculate where they stand based on the data that they know.
The ranking should be fair to each salesperson and account for different sales positions, tenure, and quota*.
Here are six clear, measurable, and fair metrics you can use to rank your sales team. These metrics should be weighted appropriately and can be used to create weekly sales team rankings.
- Quota Attainment Last Quarter (20%) – Measure the last completed quarter. We all know that orders tend to come during the third month of a quarter. If a salesperson finished last quarter strong you want to recognize that momentum in the weekly rankings the following quarter.
- Quota Attainment This Quarter (20%) – This metric is used to measure in-quarter performance. As your team progresses through the quarter each salesperson will get closer to attaining their quarterly goal. You want to recognize those that get there quickly.
- Pipeline Coverage This Quarter (20%) – This metric is used to measure in-quarter expected performance. It tells you how much total pipeline a salesperson has compared to what is remaining of their quarterly goal. This is in line with the old 3x pipeline rule.
- Total Pipeline Forecast (20%) – This metric rewards those salespeople that have a healthy pipeline. It represents the total forecasted value of their pipeline. In this case, forecasted means how much of their pipeline will actually win.
- Opportunity Amount Accuracy (10%) – This metric is used to help sales leaders promote good CRM behavior. It is based on the amount a salesperson projects when they qualify a deal compared to how much is actually closed. If the amount is within 10% that is considered a good estimate but can depend on your pricing strategy.
- Opportunity Close Date Accuracy (10%) – This metric also helps sales leaders promote good CRM behavior. It is based on the estimated close date when the deal is qualified. If it is within 30 days it is generally considered a good estimate, but depends on your average sales cycle.
Now that you have all of these metrics what should you do?
Share Individual Performance
Make sure each sales rep knows where they stand on all six metrics and where they stand overall. A forced ranking does not replace good managers but can be used to facilitate a good discussion. Sales leaders and first-line managers can use the ranking to recognize good performance and identify where a salesperson is falling short.
Praise Top Performers
Everyone usually knows who the top performers are, but you should still publicly recognize them. The bottom performers also know who they are, there is no need for public shaming. In addition, by publicly sharing the entire ranking you risk alienating those steady performers in the middle. This is especially true if there is not a lot of difference between salespeople in the 25th percentile and those in the 75th percentile. You do not want to create a zero-sum where one salesperson’s win is another loss. You want them focused on beating the competition, not each other.
Compare to Peers
Not all sales positions are created equal. You should compare salespeople to those in similar positions. It does not make sense to compare a small-business inside sales rep to an enterprise rep in the field.
Routinely Update Sales Team Rankings
You want your sales team to stay engaged. To do that, they need to know where they stand at any point in time. If you update the rankings on a routine basis (weekly) you keep them fresh, and keep your team engaged. Plus, if someone has a bad month, they can recover quickly.
You are now ready to implement and manage sales team rankings that are clear, measurable, and fair. At ORM we specialize in predictive sales analytics that includes resource optimization, forecasting, and sales management tools. If you have questions or would like to discuss your ideas, please let us know at firstname.lastname@example.org.
*Sales quotas are often set on an annual basis. On a quarterly basis, you should consider seasonality in your business and a salesperson’s expected sales efficiency based on tenure.