I’ve been seeing a lot of attention paid recently to activity-based sales management. Put simply, it’s the principle that sales managers need to give their sales people targets for measurable activity levels such as the number of calls made, meetings arranged or demos given.
The theory is that the more activity sales people undertake, the more likely they are to be successful, and there may be indeed be some correlation between activity and results in high volume transactional sales environments. But the relationship is nowhere near as clear in complex B2B sales environments, and an obsessive focus on activity levels can end up driving entirely the wrong behaviour…
By the way, sales is not the only discipline that can suffer from an obsession about raw activity levels. When marketing organisations are primarily measured on metrics like number of “leads” generated, or on the number of website visits achieved, it inevitably drives dysfunctional behaviour and stimulates a growing rift between marketing and sales.
Why? Because focusing on raw numbers makes no judgement about the quality or value of that activity. It takes no account of whether or not the activity resulted in any progress being made towards the organisation’s revenue goals. And it completely fails to take into account whether the activity added any value to the prospect’s buying decision process.
I’m not suggesting that sales metrics aren’t important. Monitoring the right metrics is critical to managing any successful sales organisation. It’s why I’m such a fan of sales analytics. And it’s why so much investment is going into the technologies that enable organisations to analyse and act upon what’s really going on in their pipelines.
Good metrics focus sales people’s attention on doing the things that add genuine value to their pipeline and increase their chances of achieving and exceeding their revenue targets. Bad metrics are at best a distraction but more often than not actually make it harder for good sales people to achieve their revenue goals. Let’s run through some examples.
PROSPECTING BASED METRICS
I’ve seen many organisations that target their sales people on making a stretchingly-hard-to-achieve number of calls every day. But a rigid and thoughtless application of this thinking can actually discourage sales people from investing in the research and preparation that would allow them to make better calls to better qualified prospects.
The same holds true for targets that focus on the number of conversations without regard for the quality of those conversations, whether anything valuable was learned from them, or whether the prospect agreed to advance to the next stage of our defined sales process. And it also holds true for targets based around the number of demonstrations that are performed without regard for the outcome.
One of my more enlightened clients described these raw volume-based approaches as being akin to “vigorously flicking a s**tty stick against the wall and hoping some of it might stick”.
It’s not just ineffective: it can also serve to make it far harder for us to identify and focus on the truly promising opportunities. There’s a real and present danger that they will get lost in the crowd and will have moved on under their own steam towards another solution before we manage to recognise their potential.
There’s a simple way of addressing this problem: instead of primarily measuring these raw “top of funnel” metrics, we need to measure the outcomes that we are trying to achieve - which in most rational sales organisations is the number and realistic potential value of qualified sales opportunities that are accepted by the sales people and added to the actively managed opportunity pipeline. And we should measure them on qualified pipeline value and ultimate revenue generated.
My strong recommendation is that you focus primarily on these outcome-based metrics and allow a certain amount of flexibility in how your demand generation and pipeline building resources go about achieving the goal. If we have well-organised people who are capable of achieving these targets by doing fewer, more intelligent activities, we should applaud them, rather than divert them from their task - and we should look to see what their colleagues might learn from them.
PIPELINE RELATED METRICS
I’ve also come across many sales organisations where there is an unhealthy focus on pipeline coverage: the ratio by which the total pipeline value exceeds the revenue target. This is another metric that often leads to utterly dysfunctional behaviour.
There’s been some interesting recent research that confirms that in complex sales environments, having too high a pipeline coverage ratio actually makes it harder to achieve revenue targets.
It’s not hard to work out why: in my experience, top performing sales people have too much respect for their own time to waste it chasing poorly qualified opportunities that are unlikely to result in revenue. Their close rates for the remaining well-qualified opportunities are typically well above the average for the sales organisation as a whole.
By contrast, many average sales people behave as if having an apparently large number of opportunities serves as some form of comfort blanket. They hold on to poorly qualified opportunities like a drowning sailor desperately grasping hold of a soggy piece of flotsam. And they aren’t averse to valuing those opportunities with what might be characterised as unjustified optimism.
Can you guess what happens when sales leaders and sales people are evaluated on the value of their pipeline? You end up unwittingly creating a situation where they are disinclined to quality bad opportunities out, with the result that pipeline values are disastrously over-inflated.
In fact, whenever I conduct a robust, evidence-based pipeline review in behalf of a client, their pipeline value inevitably declines at first (because many of the so-called “qualified opportunities” turn out to be nothing of the sort) before - with better focus and stronger qualifying discipline - the value starts to build again, as does the rate at which opportunities are converted to revenue.
BE CAREFUL WHAT YOU MEASURE
These are just a few examples. My overriding recommendation is to choose what you measure carefully, and to ensure that your people apply the metrics thoughtfully. As sales leaders, our goal is to consistently exceed our revenue targets. If the metrics we choose to adopt fail to direct our sales people’s actions towards that goal, we only have ourselves to blame.
Activities by themselves are irrelevant. It’s only the contribution to outcomes that really matter. And that’s what we ought to be measuring.
Bob Apollo is the Managing Director of UK-Based Inflexion-Point Strategy Partners. He writes and speaks regularly on the critical importance of establishing scalable sales processes in driving B2B sales success.
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This article was first published on LinkedIn.