CHAPTER 4
Sales Objectives—the Sales Force’s Mandates

SMILE … FOR A WHILE

Business Results, Sales Objectives, Sales Activities, causal links, reverse-engineering—does sales management have to be so complex? No, not always. But as an organization grows and the demands on its sales force expand, sales management necessarily becomes a more sophisticated endeavor. Otherwise, the sales force can’t execute the company’s go-to-market strategy with precision. Let us explore an example of how such complexity evolves from the simplest beginnings.

Imagine for a moment that you are a young entrepreneur named Griffin. You have just invented a wonderful new device that you believe will revolutionize workplace environments around the world. Your new contraption attaches to commercial ventilation systems and injects a tiny amount of a harmless, nontoxic gas into the air that causes office workers to experience a temporary boost in both their energy and happiness. In addition to creating a more pleasant working environment, it can boost worker productivity by up to 25%. You name your revolutionary product the “Smile-a-While.”

Soon you have a new business card with “CEO” stamped on it. Now all you need is a business. As your first executive decision, you choose to hire a salesperson in New York City and turn him loose in search of some revenue. The response is outrageous. Within the first month, he sells 50 Smile-a-While units, and you are getting dozens of calls a day from businesses that want to purchase your workforce productivity device. The revenue starts to flow, and your new business is up and running.

Over the next year, you experience incredible demand for the Smile-a-While. As your salesperson becomes overwhelmed, you hire four more sellers to follow up on leads in the New York area. You also decide to focus on what you have found to be the ideal customers for the Smile-a-While—owners of very large office buildings. The orders come in as fast as you can handle them, and your company continues to grow.

At this point, your sales force is pretty easy to manage. In fact, it’s so simple that you’ve been doing it yourself. Every week your salespeople receive a bunch of leads, they filter through them to find the owners of big office buildings in the city, and then they go out and close deals. With very little involvement from you, your sales force quickly conquers the New York market. There are smiles all around, but things are about to get more complex.

You decide that it’s time to really grow your sales force. Having captured all of the prime targets in New York City, you want to deploy additional salespeople into other major cities around the world. But how many salespeople do you need? And how would you most efficiently assign them to geographic territories? Though you’ve made a good amount of money over the past year, the size of the investment required to deploy such a sales force demands that you do so in a thoughtful, deliberate fashion. Too few sellers in a major city, and you’ll be missing opportunities. Too many sellers in one location, and they’ll be stepping all over one another, wasting your money as they go. Deploying the optimal sales force is going to be tricky.

In addition to your questions about the efficient deployment of your sales force, you also have concerns about hiring the type of salespeople that can most effectively sell your product. You’ve noticed over the past year that two of your sellers have been much more effective than the others in selling the Smile-a-While. If you’re going to hire hundreds of salespeople to work in distant locations, you need to make certain that you’re hiring the right people with the right skills. This might even be more important than determining how many salespeople to hire. Realizing that you are an inventor and not a sales force expert, you decide to hire a vice president of sales to help build and grow your sales force.

Your VP of sales, Avery, ends up being a real ace. Over the next 24 months, she successfully deploys hundreds of capable salespeople and managers in major cities across the globe. Because of this large and effective sales force, you quickly have Smile-a-Whiles installed in most of the world’s big office buildings. But you soon discover that success demands more success.

Though you’ve made a small fortune, you have also taken on some investors, and they are clamoring for continued growth. To help with this challenge, you decide to hire a vice president of marketing to expand the company’s focus. After extensive market analysis, your new VP concludes that the next logical opportunity lies in capturing smaller customers. If you are to continue to grow your company at such a fast rate, you must move down-market and also target the owners of mid-sized office buildings. This seems like a solid strategy, but targeting a new segment of customers will come with some practical hurdles.

The current model of the Smile-a-While is designed to work in large office buildings only, which is why it has been such a success with the owners of these big structures. To succeed with this new type of customer, you will have to develop an additional product line that is suited for smaller ventilation systems. Being a brilliant inventor, you gladly accept the challenge and set to the task of designing a Smile-a-While for mid-sized office buildings. Within six months, the new Grin-Again product line is ready to launch.

It’s now been four whirlwind years since you invented the Smile-a-While. As you sit in a large conference room and reflect on your very first year as CEO, you can’t help but wish things were that simple again. You had one product, one target customer, one salesperson, and ample revenue pouring in the door. Now you have multiple product lines, multiple target customers, a global sales force, and investors to whom you’ve promised increasing revenue growth. This is getting even trickier.

Despite the complexities, the Grin-Again product launch is critical to your company’s future, and it must go well. But several vital decisions beckon:

 

How much bigger must your sales force become?

Will it be capable of selling both product lines?

How will you ensure that the right customers are being targeted?

How will you get your sales force to sell the right products?

You didn’t face these decisions four years ago when you only managed a single salesperson with a single task. A slight grimace appears on your face, defying the harmless, nontoxic gas that bellows from your building’s Smile-a-While unit. Alas, you long for the good ol’ days when all you needed was a little revenue.

BEHOLD, THE SALES OBJECTIVE

So this is how sales management becomes complex. As companies grow and their go-to-market strategies become more sophisticated, it is no longer sufficient to simply hire any salesperson, call on any customer, and sell any product. Some customers are better than others, some products are better than others, and as we all know, some salespeople are better than others. Deliberate action is required.

We were working with a client recently, and one of its very tenured sales managers was lamenting the evolution of his organization. Perhaps you’ve heard similar tales of woe:

 

When I started working here 30 years ago, my manager handed me a phone book and said, “There’s the phone. Go make some sales.”

Now we’ve got high- and low-priority customers, marketing is constantly pushing some new product on us, we make our reps enter a bunch of information into a computer, we’re expected to measure this and measure that. It’s just crazy.

To which we replied, “Great.” It’s better to be crazy than stupid. Or even worse, broke.

In the twenty-first century, the only companies that can manage their sales forces with a phone book are the ones that have just started their businesses and the ones that will soon be out of business. Hiring the right salespeople, deploying them in the right way, targeting the right customers, and selling the right products is the only formula for long-term organizational health. The question that each organization has to answer for itself is, What does right mean for you?

Some companies will succeed by targeting large customers, and others will succeed by targeting small ones. Some companies will succeed by selling premium products, and others will succeed with more basic offerings. Some companies need big sales forces, others need small ones. Some companies require highly skilled sellers, others don’t. There are many paths to success, and history has shown that the only companies that necessarily fail are the ones that try to do it all—whether intentionally or not.

And this is why we need Sales Objectives. They help sales forces evolve from brute force, phone book–guided masses into efficient, strategically focused experts. They lead organizations down the most direct path to their desired Business Results by giving their sales forces the who, what, when, and where of selling. Success is no longer found in making enough sales calls to reach your quota. That is a trial-and-error marathon that you may or may not win. Success is now found in making the right sales calls to achieve the right Sales Objectives to reach your quota—a quicker and more predictable path to the winner’s circle.

To illustrate the power of Sales Objectives and their associated metrics as management tools, let us revisit our workplace productivity company. This time, you are Avery, the vice president of sales. You met last week with Griffin, who was quite distraught. Under intense pressure from the board of directors, he had reluctantly committed to doubling revenues over the next three years. Accordingly, he is expecting you to grow sales by at least 25% annually during that time. You give careful consideration to how you should Manage Your Sales Force through this growth, and you decide that “management by results” is your best strategy. You schedule a call with all of your sales managers to set the stage and to communicate your expectations.

 

Thank you all for joining me on the call today. I met with our CEO last week, and I wanted to communicate to you as quickly as possible a change in our revenue targets going forward. We’ve set a goal to double our revenues within the next three years, which means that each of you will now have to grow your territories by 25% year over year.

I know this is substantially more than we’d committed to delivering, but we think it is doable. On our side, we have a global base of installed customers and our new Grin-Again product line, which is priced substantially lower than Smile-a-While. Given your past successes and the strength of your teams, I know you will work hard and achieve these new goals. As always, you have my support in every way. Good luck.

The message has been communicated loud and clear: the sales managers have to find a way to grow revenue by 25% a year. How they achieve this result is up to them, but they’d better get there regardless. So what are the managers supposed to tell their sales reps to do? Let’s see how a few of the sales managers answer this question for themselves as they hang up their phones:

 

Manager 1: Wow, 25% revenue growth? Wow. Well, no use whining about it—let’s think about how I’m going to do this. It’s pretty clear that we’re not going to grow like that selling the cheaper Grin-Again product. We’d have to sell twice as many of those over the next year as we would Smile-a-Whiles. I’m going to need my sales reps to focus almost exclusively on driving Smile-a-While sales. Otherwise, we’ll never get there from here.

Manager 2: Wow, 25% revenue growth? Geez. Well, no use whining about it. I think Avery was right—the installed customer base is probably the path of least resistance to making this happen. I wonder if we could approach our current Smile-a-While customers about switching to Grin-Agains? Some of them could probably get by with the lower capacity. For that matter, they could buy two Grin-Agains and still save money over a full Smile-a-While upgrade. That’s it. That’s how we’ll get there from here. We’ll ride Grin-Agains all the way to the bank.

Manager 3: Wow, 25% revenue growth? I should have seen this coming. The corporate office is always upping the ante for us guys in the field. Now, how am I going to make this happen? If 25% is the growth target, then I guess they’re expecting us to work 25% harder. I’ll have to send my reps calling on prospects farther outside of their cities, but I think I can dig up 25% more leads than we’re feeding them now. It’s gonna be tough, but we’ll all just have to grind it out.

Three different sales managers, and three different strategies. One will neglect the new product line, one will cannibalize the current product line, and a third will just grind it out. Hmm. It’s not looking good for Griffin. He might have some explaining to do to his board of directors, as his sales force muddles through the next three years.

Perhaps there is a way that Avery could have avoided this unfocused selling effort by providing her managers with a little more guidance in the form of thoughtful Sales Objectives. Let’s give her one more conference call to send her people down the right path:

 

Thank you all for joining the call today. When we spoke last week, I shared with you our new revenue targets for the next three years. I want to follow up with you regarding the path that we believe will get us there most quickly and most likely.

You all have done a fantastic job over the last several years in selling Smile-a-Whiles into most of the large office space around the world. Consequently, we already have 80% of the segment as customers, and we don’t believe that the remaining 20% is fertile enough ground for us to reach our goals by concentrating solely on large customers. While we can’t ignore that segment, we will need to shift our focus to the owners of smaller buildings that are perfectly suited for our new Grin-Again product line.

We have set an objective for next year to get 30% of our revenue from the Grin-Again line of products. The following two years, we would like to see that number increase to 40% and 50%, respectively. I trust that each of you will adjust your selling activities appropriately to target smaller customers in whatever portion you believe will get you to these product-mix objectives.

Also, your reps will receive training on the new product line within the next 90 days, which should help with this transition. And I would like for each of you to provide me with a 12-month hiring plan that you think is reasonable.

Hopefully this call has provided you with a little more direction and confidence that we can attain our desired outcomes. Thank you again.

Unlike the panic-inducing first call, all three managers will leave this conversation with the exact same Sales Objective—to get 30% of their revenues next year from the Grin-Again product line. They also know that they must shift sufficient selling effort toward smaller customers in order to hit that number. Further, they will schedule product training for their reps and determine how much additional selling capacity is needed to reach their three-year growth targets. Sounds like a good plan.

This is how powerful clearly stated Sales Objectives are in driving sales force behaviors that are aligned with corporate goals. Sales Objectives are often the missing link between what the leadership team wants and what the sales force does. Without cogent Sales Objectives, the sales force does the best it can. With cogent Sales Objectives, the sales force does what it should.

So one school of sales management says to just tell your sales-people the results you expect and then trust them to deliver. In other words, “We need 25% growth in revenues, please. Let us know if we can help.” This management style is certainly easier than charting a predefined path for your sales force, and some managers and sellers may even prefer it, because it gives them the freedom to define their own strategy. However, it’s hard to argue that it’s the best approach to drive consistent execution in the field that you know will lead most directly to your goals. It’s the equivalent of saying, “There is the finish line. Feel free to take as many suboptimal paths there as you like to get there. But run fast!”

Our school of thought says to tell them the results you expect, tell them the objectives that will get them there, and then trust them to execute. In other words, “We need 25% growth in revenues, and here is what you need to do to accomplish that.” If I were a VP of sales wanting more control over field-level activity, then I would prefer this approach. If I were a sales manager wanting a clear path to success, I would also prefer this approach. And if I were a salesperson wanting to avoid the pain of trial-and-error selling, I would strongly prefer this approach. It’s the equivalent of, “There is the finish line, and here is the shortest route to get there.” Behold the power of the Sales Objective.

STUFF FOR SALES MANAGEMENT TO WORRY ABOUT

As we discussed, Business Results are the outcomes of an entire organization’s collective efforts. If a company has enough happy customers to meet its financial expectations, life is good for everyone. No single corporate function can take credit for the health of the entity, but every part of the business must contribute. That is, each part of the organization has objectives that it must achieve in order for the company to attain its high-level Business Results.

For example, manufacturing’s objectives might include producing enough products to satisfy customer demand. Marketing might be accountable for developing new products that are relevant for its target markets. Finance might be tasked with maintaining sufficient selling capacity to pursue all desired opportunities maintaining sufficient capital to operate the business. Across the company, every department has critical business objectives that are specific to its functional domain.

Sales, of course, has its own set of management objectives. They are sales’ contributions to the company’s overall Business Results and are the guideposts that the sales force should use to align its day-to-day selling activities. When we studied the metrics on our wall, we found that four distinct categories of Sales Objectives emerged (see Figure 4.1).

FIGURE 4.1 The Sales Objectives

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First, there is a group of metrics that we labeled Market Coverage. These metrics measure the objective of having enough salespeople in the right places to cover all of a company’s desired prospects and customers. A sales force must be the right size and shape in order to fully execute its go-to-market strategy.

The second set of metrics we found is meant to assess what we call Sales Force Capability. These metrics quantify the objective of having effective salespeople who can competently sell your products to your target customers. If there is sufficient Market Coverage and the sellers are highly capable, then the company has a very potent sales force indeed.

Third is a collection of metrics that measures Customer Focus. These metrics evaluate the objective of attracting, retaining, and growing the types of customers that the organization wants. Whether the company wants to focus on new customers, existing customers, or some other demographic profile, these measures provide the sales force with guidance on which customers to pursue.

Finally, we observed a category of metrics about Product Focus. These metrics measure the objective of selling the products and services that the company prefers to sell. Whether they are products with higher profit margins or they have some other strategic value, these metrics focus the sales force on selling the right things.

In sum, these four Sales Objectives and their associated metrics help answer the questions our young entrepreneur posed as he tried to position his company for growth:

 

Do I have enough salespeople in the right places?

Are they capable sellers?

Are they targeting the right customers?

Are they selling the right products?

It is worth restating that Sales Objectives cannot be directly managed; they must be influenced by directing Sales Activities. For instance, you cannot immediately have more salespeople, but you can begin recruiting additional head count. You cannot command your salespeople to have more skill, but you can send them to training. You cannot instantly have more new customers, but you can ask your salespeople to make more prospecting calls. And you cannot will your current product mix to change, but you can propose certain products more frequently in your sales calls. Therefore, setting the right Sales Objectives provides sales managers with critical directions on how they should manage their salespeople’s daily activities. See Figure 4.2.

FIGURE 4.2 Prevalence of Sales Objectives by Category

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It’s also worth noting that sales management does not always get to choose the specific Sales Objectives for which it is held accountable. Often marketing and senior executives have the heavier hand in identifying the “right” customers to target and the “right” products to sell. However, once the Sales Objectives are determined and the performance targets are set, the responsibility for achieving the objectives falls squarely on sales management.

This fact was phrased perfectly by a client of ours. We were training a team of its sales managers on how to use the concepts in this book to improve coaching interactions, and one of the VPs of sales happened to walk in as we were discussing Sales Objectives. He glanced at the metrics on the board and immediately blurted out, “Hey, that’s all the stuff that I worry about!” Yes, it is true—this is the stuff that good sales management should worry about.

THE SALES FORCE AS GROUND COVER

Companies have tried for decades to clearly define the relationship between their sales and marketing functions. One definition that we found interesting proposes that the role of marketing is to provide “air cover” for the sales force. If that’s the case, then I guess it’s fair to consider the role of the sales force to be “ground cover” for marketing. Whatever products marketing conjures up at a company’s corporate headquarters, its salespeople will find a way to sell in their far-flung sales territories. But it’s crucial that the sales force has the right troops, in the right numbers, in the right places to fight and win each battle. Otherwise, trouble will ensue.

Appropriately, we found a category of Sales Objective metrics that is used to measure just those dimensions of a sales organization. We called this category Market Coverage, and it includes these numbers:

 

Percentage of Market Opportunity Covered

Percentage of Target Prospects Contacted

Percentage of Productive Time for Reps

Percentage of Vacant Positions

In essence, these metrics all point to one vital question for sales management: does your company have enough salespeople engaging the right customers to accomplish its go-to-market strategy? Or stated differently, is there enough selling effort in place to capture all of your potential opportunity in the marketplace? Too much effort, and your cost of sale is high. Too little effort, and your revenue underperforms. Spend the effort on the wrong customers, and resources are wasted. Finding the right coverage model is a key to optimizing sales force productivity.

The objective of the Market Coverage sales metrics is to help make staffing and time allocation adjustments that will keep your sales force operating at peak productivity.

There are many different ways to measure your level of selling effort. Company-wide, you could calculate it as the aggregate number of hours your sales force has to make sales calls, say 60,000 hours per year across all of your salespeople. You might also examine it at an individual level, like 6 hours of productive time each day per salesperson. You could even measure it from a customer’s perspectives, for instance, each of your customers is contacted 12 times a year. However you choose to analyze it, Market Coverage metrics attempt to gauge when you have enough sales force to do what you want to do. See Figure 4.3.

FIGURE 4.3 Sales Objective Metrics in Our Study: Market Coverage

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To examine how Market Coverage metrics might be used in practice, let’s revisit the tale of our CEO and vice president of sales. It has now been one year since they announced their new growth targets, and they are meeting to review progress against their desired Business Result of a 25% increase in revenue.

 

Griffin: Avery, I have to tell you that I’m very pleased with our revenue growth this year. It’s almost hard to believe that we were able to grow our revenue by 30%.

Avery: Yes, things have mostly gone according to plan. And trust me, we did lots of planning.

Griffin: I know that you and your team have been practically trapped in your war room most of the year. What did you find to be the key drivers of your success?

Avery: Well, there have been a lot of contributing factors, but most of the growth came from the launch of our new Grin-Again product line.

Griffin: Oh sure, those numbers were spectacular.

Avery: Yes, but there was a lot of stuff to worry about during the launch. Probably our biggest concern was getting the sales force to the right size to both sustain our Smile-a-While sales and launch the Grin-Again.

Griffin: I remember that you requested a lot of new head count.

Avery: Getting the right amount of selling effort in the field was absolutely critical if we were going to make this happen. There was no margin for a trial-and-error approach.

Griffin: Agreed.

Avery: I don’t know if you recall, but we had some pretty clear sales force objectives that guided our actions. For instance, we wanted to make at least one sales call on 25% of the addressable market for Grin-Agains every 120 days after the launch. Therefore, Percentage of Grin-Again Prospects Contacted per Quarter became a key number on our war room wall.

Griffin: Hmm. You weren’t just reporting progress against the revenue goal? You were actually tracking the number of calls that you made on certain types of customers?

Avery: Absolutely. It was essential to ensure that we were covering our market properly. If we didn’t make enough calls on the right types of customers, it wouldn’t matter how skilled our salespeople are or how wonderful the Grin-Again is. We could’ve never hit our revenue number. So we asked each of our reps to make 10 Grin-Again prospecting calls each week.

Griffin: That’s really smart. I knew there was a reason we hired you.

Avery: Well, we didn’t stop there. We had to set a couple of other objectives for the sales force in order to make those calls. For instance, we calculated that we needed to hire 10 sales reps every 30 days in order to grow our head count sufficiently. Therefore, another important metric on the wall was Percentage of Job Openings Filled per Month. And finally, we really couldn’t afford much sales force attrition during this time, so we also kept a very sharp eye on Percentage of Involuntary Turnover per Quarter. We wanted that number to stay below 10%. By getting enough selling effort in place to make enough calls on enough prospects, we gave ourselves at least a fighting chance to hit our goals. If we hadn’t tracked those key Sales Objectives, it’s unlikely that our attention would’ve been focused on getting the Market Coverage correct. We would have just stared at our revenue number, wondering why it wasn’t moving fast enough.

Griffin: Avery, I’ll say it again: I knew there was a reason we hired you.

The VP of sales was exactly correct in her assertion that having enough of the right selling effort in the right places is foundational to success. If your sales force doesn’t have sufficient hours in the day to do what it needs to do, then it’s fighting a losing battle. We once analyzed a client’s sales force that was falling dramatically short of expectations, and we discovered that its head count was half the size it needed to be in order to make its desired volume of sales calls. No surprise, then, that its salespeople were both exhausted and frustrated. They didn’t have a fighting chance.

We suspect that many sales leaders find themselves in the unfortunate position of trying to perform Herculean feats with undersized sales forces. In fact, we’ve seen data suggesting that most sales forces are understaffed to execute their go-to-market strategies. We don’t know whether or not that is true, but our research did reveal one thing for certain: most sales forces don’t know either.

Market Coverage metrics were the least prominent of the Sales Objectives measurements in our research. Whether it is because the numbers are difficult to calculate, or whether it’s too enticing to just allocate head count based on intuition, these numbers are missing from most war room walls. It’s a shame, because these metrics would be extremely useful for leadership.

If these metrics were on the wall, it would be easier for sales management to staff its sales forces appropriately. Companies could get the greatest possible revenue at the least possible cost by fine-tuning their ground cover to fit the market opportunity. Managers could make informed decisions at the Sales Activity level that could dramatically affect Sales Objectives and Business Results. If your company doesn’t collect Market Coverage metrics, just imagine what you might be missing. Or stated more accurately, imagine which customers you might be missing.

THE “CAPABLE” SALES FORCE

We just stated that getting the right number of salespeople in front of the right customers is a foundation of sales success. However, to build on that foundation, you need sellers who know what to do once they are in front of the customer. When an unqualified seller meets a qualified prospect, it’s not only a waste of time for the buyer. It’s a waste of resources for the sales force.

The second type of Sales Objective metric we found in our research is therefore intended to prevent such disastrous consequences. Measures of Sales Force Capability are intended to answer the specific question, Are my salespeople capable of doing what they need to do? Sales Force Capability metrics include numbers like these:

 

Deal Win/Loss Ratio

Percentage of Deals Advancing by Stage

Length of the Sales Cycle

Salesperson Competency Index

Unlike measures of Market Coverage, nearly every organization has these numbers on their wall. This is because of the obvious and direct linkage between the capability of a sales force and the achievement of its desired Business Results. If you close more deals, you get more revenue. If you can shorten the sales cycle, then you get that revenue even faster. These are very powerful metrics, for sure.

At first glance, the term capability might seem to refer to the skill level of a sales force, and skills are typically the first lever that sales management pulls to boost Sales Force Capability. If salespeople don’t seem “capable” of winning enough deals, then off to a training class they go. And while the skill of the salesperson is unquestionably an important determinant of his success, Sales Force Capability is affected by many more things than just selling skills.

Capability is a measure of the sales force’s overall effectiveness in accomplishing its goals.¹ This is influenced by the strategies the salespeople employ, the processes they are told to follow, the tools they are given to support their activities, the expectations that are communicated to them, and many other sales management decisions that go well beyond the scope of training to develop sheer selling skills. We too often see management relying on only two levers to drive sales performance—training and incentive compensation—but Sales Force Capability is most forcefully influenced by applying pressure from many different directions. So while these measures do point to the underlying skill of the sales force, management has many ways to affect the capability of its sellers.

There are three interesting characteristics about this category of Sales Objective. First, very few companies in our study attempted to gauge Sales Force Capability by measuring skill or knowledge directly. Whether for the reason just stated or because skills can be difficult to quantify, we observed only a few related metrics, like Comprehension of Product Knowledge or Demonstrated Selling Skills. Most often, companies chose to judge their salespeople’s capabilities by the outcomes of the sellers’ effort. Metrics such as Close Rates or Conversion Ratios Between Stages were used to assess the overall abilities of a sales force, incorporating the impacts of sales training, selling processes, supporting tools, and other influencers.

Second, there is no objective benchmark for excellence. Unlike Market Coverage, for which the goal is clearly to cover 100% of your targeted customers, it’s unrealistic to expect your sales force to close 100% of its deals. So what, then, would you consider to be an excellent Deal Win Rate? Should your sales force win 75% of the deals it pursues? Or 50%? Or 35%? Who knows? These numbers are only relative to your own sales force’s past performance. Your threshold for “good” must come from within.

Finally, you always want all of these metrics to be improving. With a different Sales Objective like Product Focus, you may set an objective this year to obtain 30% of your revenue from a new line of products, and then next year you may intentionally lower your target to 20% as your product strategy shifts. However, you never want your Deal Win Rate to drop from 30% to 20%. Never. You always want more deals to advance and your skill level to increase. You always want your sales cycle to shorten. You always want your Sales Force Capability metrics to move in the same direction. This is a classic case of continuous improvement as the goal. So while there is no clear destination for any of these numbers, you always know which direction you want to be headed. See Figure 4.4.

FIGURE 4.4 Sales Objective Metrics in Our Study: Sales Force Capability

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To view these numbers in action, let’s return to Griffin and Avery. It is now 12 months later, and they have just completed year two of their three-year growth plan. Griffin comes striding into Avery’s office.

 

Griffin: Avery, I just saw the final numbers for this fiscal year’s revenue. We totally destroyed the target! Congratulations on yet another great performance by your sales team.

Avery: Thank you, boss. I have to admit that even I was surprised by how far we blew past our 25% growth goal. I can’t say enough good things about our sales force—and in particular our frontline sales managers. They worked really hard this year, and even more importantly, they worked smart.

Griffin: What do you mean, they worked smart?

Avery: Well, as you recall, our big challenge last year was Market

Coverage. We needed to get enough salespeople on board quickly enough to target the new Grin-Again prospects. Don’t get me wrong, we hired good people, but last year’s success was largely obtained through brute force.

Griffin: So what was your secret to success this year?

Avery: This year was all about improving our salespeople’s ability to sell the Grin-Again most effectively. In other words, we really focused on developing our Sales Force Capability.

Griffin: Ah, interesting. So that’s why you conducted all of that sales training this past year.

Avery: Yes, there was a lot of training, but there was also much more. First we had to set some appropriate Sales Objectives so our sales managers had something to shoot for. We analyzed our Close Rates and discovered that although we had historically converted around 40% of our Smile-a-While leads, we won only 25% of our Grin-Again deals during its first year in the market. So, we figured there was room to improve our salespeople’s capabilities with the Grin-Again sales. Our objective for this year was to raise our Grin-Again Close Rates to 40%—bringing it up to par with the Smile-a-While.

Griffin: Makes sense.

Avery: Yep. We also did a little more investigation and discovered that our Grin-Again deals were actually proceeding through the sales cycle just fine until our proposals went out the door.

Griffin: What do you mean?

Avery: For some reason, our Proposal Win Rate was much lower with the Grin-Again than with the Smile-a-While. So we set a separate Sales Objective to win 60% of all proposals that were submitted to Grin-Again prospects.

Griffin: Huh. So how’d you go about increasing your Proposal Win

Rate and overall Close Rate with the Grin-Again?

Avery: We had to change quite a few things in our Sales Activities. As you pointed out, we did a bunch of training and coaching this year, but it was very focused on how to write a winning Grin-Again proposal. We also found that we needed a simpler proposal and contract for the smaller Grin-Again customers. Therefore, we developed a proposal template to help reps create better documents. Finally, we created a proposal review process so the sales managers could help the reps with quality control of all outgoing proposals. By the end of the year, our Proposal Win Rate went to 65%, which led to an overall Close Rate of 45%. And that’s how we destroyed our target last year.

Griffin: Sales Force Capability, eh? Sounds like good stuff.

Avery: Yes. It is good stuff. Hard stuff to do, but great for the sales force.

As Griffin’s ace VP of sales pointed out, having the right people in the right place is only the first of many challenges for crafty sales leaders. Next, they have to make certain that their salespeople are prepared to do the right things. And that is the role of Sales Force Capability metrics—to make sure that your sellers are capable of doing the right things. Generating leads, advancing opportunities, and closing deals are at the heart of a salesperson’s role. You need to know that your salespeople can execute such activities effectively.

One final observation regarding Sales Force Capability is the significant impact that frontline sales managers have on these metrics. While sales managers can influence all of the Sales Objectives in this chapter, the manager is uniquely able to improve a salesperson’s capability. Frontline sales managers are often the only people with the frequent access to sellers that is required to reinforce training, provide guidance, deliver coaching, ensure tool usage, and all the other activities that affect Sales Force Capability.

In fact, we found a handful of metrics in our research that evaluate the capabilities of managers themselves. Measures like Coaching Quality Index reveal how capably managers are developing their salespeople. We hope that the prevalence of manager-focused metrics increases as sales manager development becomes an organizational priority.

ACQUIRE, RETAIN, GROW, REPEAT

Management guru Peter Drucker famously wrote that there is only one valid purpose for any business: to create a customer.² This may be true, but anyone reading this book knows that there’s a little more to it than that. Customers cannot simply be created. They have to be identified, courted, and won. The level of effort required to perform these tasks necessitates focus on the part of a sales force. Time spent courting one customer is time not spent courting another. Since not all customers are equally desirable, sales management must be directive about where its salespeople are investing their time. Our study of sales force metrics revealed a category of Sales Objectives dedicated to this very decision.

Customer Focus measures point a company’s sales force in the direction of its most desired customers. They provide insight into how successfully your salespeople are acquiring, retaining, and growing the types of customers that will lead to the achievement of your ultimate Business Results. The Customer Focus category includes these customer-centric metrics:

 

Revenue from New Customers

Revenue Growth from Key Accounts

Customer Retention Rates

Revenue per Customer Segment

Share of Wallet

Not surprisingly, many of the metrics in this category were intended to measure success in acquiring new customers. New customer acquisition is a logical obsession for sales leadership, since it is the most intuitive path to growth. There is something magical about acquiring a new customer, and salespeople who have a particular knack for winning new customers are often treated as enigmatic heroes. Despite the fact that the cost of pursuing new accounts typically makes them much less profitable than existing customers, it is quite clear from our research that sales leaders regard new customers with very great affection.

Beyond distinguishing between new and existing customers, many companies in our study also set objectives to target customers with specific characteristics. These might be prospects of a certain size, in a certain industry, from a certain geographic region, or grouped any other way that potential customers can be segmented. Steering your sales force toward a particular customer segment can be a very effective way to increase win rates and boost profitability, since some customers are easier to engage and more likely to buy than others. We have seen Customer Focus objectives drive dramatic improvement in sales performance by shepherding misguided salespeople off the path of least resistance and into a target-rich environment.

Of course, many companies thrive by nurturing ongoing relationships with their existing customers. If acquiring new customers or moving into new customer segments is not a viable growth strategy, then maximizing the value of existing accounts becomes a critical Sales Objective. Measures such as Share of Wallet or Revenue Growth from Key Accounts become a focal point for the sales force, as it works to embed itself deeper and wider inside each of its accounts. All other things being equal, wooing existing customers is both easier and cheaper than courting total strangers.

We were relieved to see that there is an abundance of metrics in our research directed at customer retention and growth. We have worked with many sales forces that are so obsessed with bringing new business in the front door that they forget to lock the rear exits. One leadership team had set a target to grow its customer base by 15% annually, but it was simultaneously suffering 20% attrition with its existing customers. When we pointed out to its head of sales that his team would have to effectively grow sales by 35% each year to grow its customer base by 15%, we thought an ambulance would need to be called. To avoid such emergencies, numbers like Churn Rate and Customer Retention deserve a very prominent space on any war room wall. See Figure 4.5 for a list of the Customer Focus metrics we found in our study.

FIGURE 4.5 Sales Objective Metrics in Our Study: Customer Focus

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To demonstrate the clever use of Customer Focus metrics, let us check in on Griffin and Avery as they close the third and final year of their effort to double the size of their workforce productivity company.

 

Griffin: Whew! Avery, I can’t believe that we actually did it. Or more appropriately, your team did it. You more than doubled the size of our company in three years. Congratulations once more.

Avery: Yeah, I have to say that this was probably the most difficult year of the three. In year one, we focused on getting the Market Coverage right, which was kind of a no-brainer. In year two, we concentrated on improving our Sales Force Capability, which really made a huge impact. But once we had a capable sales force covering our target markets, we really didn’t know where year three’s revenue growth was hiding.

Griffin: We shifted our Customer Focus, didn’t we?

Avery: That’s right. One of our sales reps came up with the idea that schools would be a great target for the Grin-Again. Teachers can get greater engagement from their students, which leads to higher achievement in nearly every measure of academic performance and fewer disciplinary problems, to boot.

Griffin: You know, we probably should have thought of that in the first place. What a perfect customer segment that is.

Avery: Absolutely. So we set a Sales Objective to get 30% of year-three revenues from the education segment. Therefore, Grin-Again Revenue by Customer Type became a key metric for the entire team.

Griffin: And your salespeople responded.

Avery: It was actually more difficult than you might think to get our salespeople focused on schools as their key prospects. Calling on a different type of buyer was challenging, and the sales cycle is longer than in the commercial segments. They really resisted in the beginning, so we had to ride that Customer Focus metric hard. Our sales managers also had to make all kinds of changes to their Sales Activities, such as redesigning territories, retraining reps, etc. We even had to mandate that each rep make a dozen prospecting calls each week. It was a full-scale change-management effort.

As Avery highlighted, getting salespeople to focus on the right customers can be a challenge. Further, different Customer Focus objectives require different types of execution in the field. Acquiring new customers does not involve the same tasks as growing existing accounts. And targeting an unfamiliar customer segment can demand even more uncomfortable behaviors. Setting the proper Sales Objectives is always crucial, particularly when you’re providing your sales force with Customer Focus objectives. Put salespeople in front of the wrong customers to do the wrong stuff, and bad things will happen by design.

SELL SOMETHING … BUT NOT JUST ANYTHING

Now you have a sales force that is perfectly sized, highly capable, and totally focused on your ideal customers. The final Sales Objective that you have to communicate is this: what do you want your sellers to sell? Nearly every company has a variety of products and services it can offer to its customers. Some products are new, some are old. Some are high-margin, some are less profitable. Some are designed for specific customer uses, some are more universally applicable.

In our study of sales force metrics, we discovered that most companies are quite deliberate about which products they send their sales forces into the world to sell. Measures of Product Focus include numbers like these:

 

Revenue by Product

Percentage of Revenue from Target Products

Number of Unique Products Sold per Rep

Cross-Sell Rate

As you might detect from this short list, there are two primary dimensions to this Sales Objective—product mix and product breadth.

At one level, Product Focus metrics reveal the relative frequency with which each of the company’s products is being sold. Also known as product mix, these measures can be extremely important for product-driven companies. Such organizations with numerous product lines and frequent new product introductions can see their overall profitability affected dramatically by the types of products that are being sold.

We have one such client that maintains its premium market position and high profit margins through the frequent introduction of new products. As its existing products mature and come under competitive pricing pressure, it launches newer products that are once again differentiated and command a premium price. Its ongoing Sales Objective is to shift sales away from older offerings and toward newer products as quickly as possible. Consequently, its war room wall is covered with Product Focus numbers. If its product mix does not shift quickly enough after a new product introduction, its sales force comes under intense pressure to allocate additional selling effort toward the new offerings. Salespeople are individually measured and compensated based on these product-mix metrics.

Other companies don’t have products with such limited shelf lives, but they do have products and services that are complementary to one another in some way. These organizations can be as intensely focused on which products are being sold, however, they view an incumbent product as a point of leverage to sell additional products and services into their customer base. Typically through account planning activities and internal coordination, they hope to cross-sell a broader range of offerings that will increase the overall value of their existing customer relationships.

A classic example of ambitious cross-selling could be seen in the vast diversification of accounting firms in the twentieth century. Starting with tax and audit services, these firms soon discovered that their visibility into their clients’ operations positioned them to sell management consulting services as add-ons to their traditional offerings. And as information technology came onto the scene, these firms found that they could further leverage their management relationships into large IT consulting projects. From debits and credits, to business process engineering, to CRM implementations, accounting firms became expert cross-sellers and grew into multibillion-dollar global organizations. If you are a large client of one of these firms, you can rest assured that you are a number on their war room wall, because they maniacally track revenue diversification across their major accounts. As they should.

Using Product Focus as a primary Sales Objective can have an incredible impact on a company’s Business Results. Depending on your particular product strategy, providing your sales force with explicit guidance on which products and services to sell can set you on a course to high profitability and revenue growth. Failing to do so will essentially turn each individual salesperson into his own marketing department, setting product strategy for you as he sees fit in the field. See Figure 4.6.

FIGURE 4.6 Sales Objective Metrics in Our Study: Product Focus

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Let us pay one last visit to our friends at the workplace productivity company, where the confetti has settled after their successful three-year Grin-Again sales drive. They are now discussing their next trick to spur additional revenue growth.

 

Avery: Well, boss, we’ve accomplished all we set out to do three years ago. Where do we go from here?

Griffin: We’re going to stay right where we are, inside our existing customer base, and sell them something new.

Avery: Really. You have something up your sleeve that you haven’t told me about?

Griffin: Indeed I do. Our development group is ready to launch a new device that can be fitted to any of our existing units. We’re calling it the Re-Joys, and it enables the installed unit to be just as effective while running at a lower power setting. Also, it will pay for itself in less than a year through lower energy consumption. It should be an easy sale for your team.

Avery: That does sound easy.

Griffin: You might be pleased to know that I’ve learned a thing or two about Sales Objectives by watching you work over the past three years. We’re gonna call this the year of Product Focus. I’d like to set two new objectives for your team, if I may. The first key performance indicator will be a Cross-Sell Rate of 50%. That is, I’d like for your team to sell Re-Joys into half of our existing customers this year.

Avery: I like it. That should be doable.

Griffin: The second is an Attach Rate of 75%. In other words, I hope your salespeople can sell a Re-Joys unit with three-quarters of any new Smile-a-While or Grin-Again sales.

Avery: Also doable. Of course, our sales managers will have to once again change some of their Sales Activities—new training, altered call patterns, and so on. But I think this is a great plan.

Our final Sales Objective of Product Focus completes the lineup of stuff for sales management to worry about. First, you need to ensure that you have enough selling effort to sufficiently cover your target markets. Second, you must develop a sales force capable of effectively selling your products and service. Third, you need to focus them on the right types of customers. And finally, you must provide them with guidance on what types of products to sell. If you meet all of these Sales Objectives, you will have a laser-guided sales force that will destroy your targets as well. And that will put a smile on your face.

THE SALES FORCE: REVENUE MACHINE OR STRATEGIC WEAPON?

In today’s information age, it’s a rare occurrence when someone poses a question that can’t be quickly answered. Any question of fact is just an Internet search away, and any question of opinion can be discharged at will. For a question to really stop you in your tracks, it has to be one that lurks somewhere in-between—a question that begs the facts but is colored by opinion. These are questions that can nag, and nag, and nag.

Several years ago we were speaking with a large financial institution, and its global head of sales posed such a provocative question. His question was simply this:

How do I know if my sales force is good?

He went on to explain:

I have dozens of sales forces around the world. Sales forces that sell products, sales forces that sell services, sales forces in Europe, sales forces in North America, sales forces that target small business, sales forces that target multinational corporations. But how do I know if any of them are good? Do I judge them by whether or not they meet their quota? In reality, I set their quota, so that’s an artificial measure. And the business environments in each region vary dramatically, so their pricing varies, and their products vary. With so many variables in play, how do I know if my sales forces are really any good?

The sales leader didn’t actually expect an answer to his question that day, but he should have. He should be able to know if he has a good sales force. That’s his job. It’s every sales leader’s job to build a good sales force. But we would bet that few sales leaders can answer this question with honest confidence. How would you answer this question? How good is your sales force?

This question pestered us for quite a while. In fact, it led to some of the original inquiries that inspired the research in this book. Just because a sales force hits its financial targets, does that mean that it’s necessarily a great sales force? Of course not. We all know that many sales forces have succeeded because of a knockout product or explosive customer demand. There are dozens of factors that can drag a mediocre sales force beyond its quota. Conversely, a great sales force can be beaten down by a bad economy, a new competitor, or even a nasty rumor in the marketplace. So what should be the objective criteria for “good”?

Of course, sales forces have to be judged ultimately by their performance against Business Results, like making quota. But Revenue is too blunt a measure to reveal definitively whether or not a sales force is any good. That’s where Sales Objectives can help. Sales Objectives put a more sophisticated lens on a sales force’s performance and give us greater confidence that leadership has built a good sales force.

If a sales force is the right size to execute its go-to-market strategy, is consistently increasing its selling capability, is capturing the right customers, and is selling the right products, then you have to say that it’s a good sales force. What more could you ask? If the Business Results aren’t coming, then either expectations were set too high, or there is something else working against the sales force. It’s still a good sales force because it’s achieving all of its Sales Objectives.

In our opinion, Sales Objectives should not only be the key performance metrics for a sales force but also the indicators of good sales management. If the Sales Objectives are set properly and the sales force is meeting them, then it’s a gold star for sales leadership. Conversely, if the Business Results are being met but the sales force is mangling the Sales Objectives, then management gets a silver star, at best.

This last point begs another fundamental question:

What is the role of a sales force?

If its role is to simply churn out acceptable Business Results quarter after quarter, then a sales force can absolutely succeed with brute force and dumb luck. And there are many organizations that are content with this role. How often do we hear marketing complain that its sales force isn’t executing the company’s product or customer strategy only to hear sales respond, “Well, we hit our numbers.” We hear it a lot. In companies like these, the Sales Objectives are totally irrelevant when compared to good Business Results.

However, there are many organizations that do not find it acceptable to make the numbers by any means possible. These companies view their sales forces as strategic weapons against the competition. With capable salespeople who can be directed toward specific customers with specific products, they are market leaders that can nimbly shift gears to take advantage of new buying trends or strategic opportunities. Of course these sales forces also have to achieve their Business Results, but they do so in a disciplined and controlled manner.

This is why Sales Objectives are so vitally important. They give management a deeper level of control over the performance of its sales force: “Don’t just bring us revenue—bring us the right revenue in the right way. And here is what we mean by right.” When desired Business Results are supported with relevant Sales Objectives, the sales management code begins to crack a little more.

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