What is Sales Productivity and how do you measure it?
What gets measured gets done!
Sales productivity is one of the most talked about sales leadership subjects, so much so that I wrote a whole book on the subject. (The Street Savvy Sales Leader-due out summer 2018) www.streetsavvysalesleadership.com
How to do you get more out of your sales resources?
At its most basic level, it is about building the best sales teams you can possibly build;
have them work together collaboratively;
support them and coach them to the highest level possible;
help point them in the right direction and plan for success;
have a mindset of continuous improvement and learning;
don’t bog them down with excess administration and other extraneous reporting or management demands;
build a strong sales process with well defined analytics;
have a customer-driven mindset;
and build a culture where they can flourish in a trusting, and caring environment.
The answer to the question on what is sales productivity and how do you measure it depends in large part on what is being sold, the market segment and size, and fundamentally what is most important for the organization to measure. But at the end of the day, to me it's quite straight forward, the more each individual sales rep sells on average (Whatever the measure), the higher the sales productivity.
This could be the more widgets or units the sales rep sells, or the more revenue the sales rep sells, or the more margin a sales rep sells, more net new customers, or increased wallet share. The measurement really depends on what the company is trying to achieve, what is most important to the growth of the company, and what is the company’s strategy. In a declining market for example it could even represent retention numbers. The answer lies at least in part in what your company objectives are.
The more challenging question is How do you measure it? What is the benchmark? and What do you want or need it to be?
The best example of a sales productivity measurement is to simply calculate what was sold by the sales force in one period and compare it to what was sold in a latter period. So, from a starting point, “what gets measured gets done”. You must start tracking all the sales numbers so you know where you’re at. I know it’s a given, but I also know of many organizations, and quite large and somewhat sophisticated companies that really don’t have a good handle on their detailed sales numbers.
How can you set a benchmark and track progress? How do you know if any investments you make contributes to the sales force selling more stuff if you don’t have the measurements in the first place? How do you even know what your problems are if you can’t measure the actual sales statistics?
The best example of sales reporting I ever experienced was in a mid sized company of just under 200 employees with over 30 sales reps at the time. We knew how much each rep sold each month for the previous 5 years. We knew what was sold by each rep by tenure, how much they sold on average if they were a 3 month, 6 month, 9 month, or 12 month and longer tenured rep. We knew how much was sold on average by geographic region and by product, we also knew how much was sold on average by each sales manager. We tracked this by average by month and by rolling average by quarter.
On top of that, we knew these statistics and could tie them in with turnover ratios as well. These measurements helped us understand our sales results and our comparative sales results over time, by region, by manager, and by sales rep tenure. We could pinpoint sales problems in all those areas so that we could dig in and work on determining why the numbers were off, and take steps to improve them.
You can’t figure out where you’re going without knowing where you are. I can’t stress this enough; sales reporting is critical to sales productivity improvements.
Another measure that we could derive very simply from this reporting was the Sales Participation ratio’s which is also a crucial measurement to understand further your sales productivity status. It is the classic Top Producer syndrome, are you getting far too much of your results from too few people? What percentage of your sales force is creating the bulk of your revenue growth? In many organizations, it’s the classic 80/20 rule, getting 80% of your results from 20% of your sales force. This needs to be challenged and worked on to improve at every turn. It is fundamental to the improvement of your sales growth.
You are probably asking yourself, how much does it cost to get these numbers, how much resources do I need to get this kind of reporting? I argue the latter; how much is it going to cost if you don’t? Tens of thousands of dollars, Hundreds of thousands of dollars, even Millions of dollars in some cases. One of the smallest organizations I worked for with the fewest resources had the best sales reporting out of any company I ever worked for.
From these sale’s reports, you can then see what the current results are, or the benchmark results are if you will. From here you set the targets you need to achieve, and then it’s a matter of setting a plan to get there.
Sales productivity improvements can be effected and affected by many high-level levers, basically though, it’s how talented your sales people are, and then it’s a matter of how efficient and effective you can help them become.
Efficiency is all about how sales is using their time, are they talking to the right people with the right message at the right time. I often ask my sales people; What is one of the most important asset that you have personally that contributes to your success? The answer is Your Time! How they can use their time more efficiently and effectively is largely how they will improve their results.
There was one time study conducted in 2013 that found that reps were spending 19% of their time in internal meetings, 41% of their time selling, and 40% of their time searching or creating and revising sales/marketing material. Not great news, less than half a sales rep’s time is spent selling. This number was much worse in some of the companies that I have witnessed.
As Neil Rackman, author of SPIN Selling stated “An effective sales force is a more sustainable competitive advantage than a great product stream” (1)
That pretty much sums up how important the sales function is and therefore how important it is that we make it the best we possibly can.
For more information on sales productivity or other leadership imperatives, please refer to my website www.steetsavvysalesleadership.com, or my upcoming book, The Street Savvy Sales Leader, or email me at email@example.com.
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(1) Spin Selling-Situation, Problem, Implication, Need-Payoff-Neil Rackman, McGraw-Hill, Inc., 1988, Page xvi