A scientific way to go the extra step in assessing our sales performance.

It’s December, a month when sales managers rush into motivating, helping, and pushing their sales team to achieve their targets, with an eye towards the end of year bonus. I’m not saying this is wrong, this is what sales managers must do but not limited to. Few who find time and discipline to analyze thoroughly and clearly their 2011 sales data in order to set the strategy and plan for the coming year.

In a recent chat with a friend, an executive at a leading IT organization, and while asking about their sales performance, he excitedly called that they are having a very good year. Starting my early career in this industry, interested and passionate about it, I went back to different published economic research reports that didn’t indicate a good growth for IT, so I was curious to call back in order to discuss further.

Posing few structured questions, we were able to point the reason behind his answer. Winning recently a big project that came after 10 bad months, they assessed their sales performance based only on two metrics.

  1. It created back the positive vibes in the sales department as well as the organization.
  2. They over achieved the overall set quota.

But the question remains, can we develop our 2012 sales strategy and set our targets based on the above data? And how would we better assess scientifically our sales performance?

Considering myself belong to Albert Einstein School in analyzing things, and solving solutions, “We can’t solve problems by using the same kind of thinking we used when we created them.”

Finding the answer relies in understanding the problem, leaving no stone unturned. Thus we should go beyond assessing our sales performance, to widen the scope and evaluate scientifically our sales organizations.

There are two major factors we should take into consideration:

External Factors

Taking into consideration that external factors are least to control, I state them briefly.

1. Market: The first thing to asses is the market situation. Assessment should be conducted based on data rather than any guess, hunch, or town conversation. In specific cases, market research co

upled with industry report shall be referred to. It is in the most crises

when opportunity rises.

2. Customer Needs: with the accessibility of information, customers became global, refined and more demanding. Thus, they hate to be spoon fed anymore. These type of changes led customers to redefine their relationships with suppliers. Accordingly Procter and Gamble revamped its whole sales structure, as well as Citibank responded to the globalization of its customers.

3. Changing Environment: The key is to keep developing our sales model in respect to all the environmental changes. This include but not limited to the new usage of Internet and social media that facilitates and simplifies our preparation for our sales meetings, as well as keeping an eye on the difficulty behind hiring sales people. Refer to the article published on Wednesday, August 24th, 2011.

4. Competitors: It is true that great companies benchmark with themselves, but it is very astute to keep an eye on the direct and indirect competitors. A thorough analysis is vital rather than just being bought by the buzz and the media.

Internal Factors

Best organizations not only adapt quickly and effectively to external factors, they also implement new strategies, launch new products, develop new sales process, revamp their sales structure, and seek constant improvement in their sales performance. This goes along a thorough examination to the internal factors.

1. Sales Strategy: Start evaluating the company on the macro level. Was the strategy appropriate in regards to all external factors? Where and when did you succeed or fail? A very helpful tool to go through is to graph your organization timeline for 2011 with all its peaks and valleys, stating the reason behind every milestone.

2. Sales Model and Process: Before blaming your salespeople, evaluate your sales process in comparison to the continuous change of your customers’ behavior. 1999 despite the long term record of success, its stock hitting high of 64$ a share, Xerox was in trouble, it needed to implement tremendous change to meet its objectives. It implemented a two-part sales strategy along with two different sales models and process. One process focused on global customers, where account managers were dedicated to create a need, educate clients on the new products to provide them the best fit solution. The other product oriented sales model focused on SMEs, that were later reassigned to indirect channels.

3. Sales Force Design: It is true that a sales person is an income generator, but there is a ceiling for newcomers, even when they are good. There are some analytical approaches that determine the size and structure of your sale-force.

i. Activity based method: (X amount of customers × % of reach × y hours per customer per year) ÷z hrs

per salesperson per year = # of  salespeople to cover a specific product for specific market.

ii. Target return per call method: Companies often have a target ROI for any investment they make. The same % should be used to compare it to the calls and meetings conducted by every salesperson. This will highlight the need of increasing the sales force or developing their closing ratio.

iii. Sales response method: The sales response approach employs concept of “sales force drives sales” directly to the product. To formulate it, use your historical information and forecast your sales for a specific product under alternate sales force size scenarios.

4. Sales Numbers: Because the purpose of sales organization is to generate sales, analyzing their numbers is a very critical task that should be conducted thoroughly. The difficulty lies in determining exactly what should be analyzed and what factors to add to the metrics.

I’ll try to simplify it as follows:

i. Organizational Level: Sales analysis should be performed on different organizational level. Performing a hierarchical sales analysis would identify specific problem areas. This goes by starting on the top level and going successively to lower levels in the organization.

ii. Type of Sales: Best categorized into

a.Product type or specific products

b.Account type or specific accounts

c.Distribution method

d.Sales deals or order size

The key is to conduct again an organizational level analysis while the numbers are categorized as above.

iii. Type of Analysis: comparing actual sales with sales forecasts and quotas is extremely revealing, especially that sales forecasts represents an expected level for defined product from a defined market according to a set strategy. An effective index could be computed by dividing actual sales results by the sales quotas and multiplied by hundred. The result should be compared directly by the sales effectiveness of different organizational level again coupled with different type of sales.

5. Sales Productivity: productivity is typically measured in terms of ratios between input and output. Because the direct effect of numbers is the productivity of sales person where all ratios are expressed in terms of the same units, it would be most useful to analyze every salesperson’s productivity. Factors could be extracted from the milestones of a sales mapped process, Refer to article published on Tuesday, September 27th, 2011. Major advantage of productivity analysis is that it provides useful information that is not available from any other type of analysis. Some factors to look at, but not limited to: number of accounts handled, number of new prospect contacted, % reached, sales target, selling expenses (variable and non-variable), sales calls, sales meeting, demonstrations, proposals, closed deals, ….