You can’t manage salespeople around revenue.
There, I said it.
Before you decide I’m crazy, take a look at this Harvard Business Review article explaining that 83% of metrics used on sales dashboards are unmanageable, including revenue.
This data comes from researchers at Vantage Point Performance, who examined 306 metrics that sales leaders in various industries thought of as critical to the effective management of sales performance. They determined that a metric was “manageable” if it could be changed by asking someone to do something differently. For example, you can coach a sales rep to go secure more VP-level meetings, and they can take action immediately. If you tell them to “go close more business,” it’s not all that helpful and most importantly, requires agreement from the customer. The rep can influence it, and that’s about it.
Sales metrics focused on controllable sales activities can be managed by the sales manager and directly influence the performance of a sales organization. But they must be tracked to be managed and impact revenue. Here’s why.
Revenue, market share, average deal size, margins -- these are all business results. They are critical to any business and serve as a corporate health check that informs executives, shareholders and customers how well your business is doing.
But business results like revenue can’t be controlled by sales organizations because they’re the result of every department’s contributions and can be affected by external factors such as economic conditions or competition. A well-oiled sales organization can absolutely influence these results, but that’s about it.
Business results are outcomes and are therefore unmanageable. Would you walk up to a sales rep and ask them to fix their close rate today? No. You would coach them to prospect into the right profile customer, to have more conversations with decision-makers or build a better ROI business case. Those are sales activities, which you can directly manage. They influence things like close rate and revenue.
Because these are the explicit behaviors of your sales team, sales activities are manageable. They are in your control. And once you understand the direct cause-and-effect relationship between sales activities and business results, you’ll be able to influence things like revenue in a more predictable way.
Think about it like this: If you need to generate $50 million in revenue this year, and your average deal size is $50,000, then you need to close 1,000 deals. Assuming you close half of the proposals you send out, then you’ll need 2,000 proposals. And let’s say you know that every 1 out of 4 meetings gets to the proposal stage. You’re going to need 8,000 meetings. Finally, if it typically takes your reps 3 phone calls to get a meeting, then your sales teams will have to knock out 24,000 calls this year to hit quota.
Suddenly, you’ve calculated the number of sales activities needed to achieve the organizational results desired. With activity-based selling, a directional sales forecast that ties directly back to the controllable actions of your sales team is within your grasp.
To achieve specific business results, you must perform specific activities. That doesn’t just mean having your team perform a ton of sales activities to hit quota. It means guiding your sales reps to the right activities that will result in closing more business.
This is where sales activity management comes in. The system helps your reps focus on the 3-4 activities that are important to their sales role. And it provides you with visibility into how reps are performing against their activity goals. When pacing falls behind, you’re able to course-correct by drilling into the data and seeing who needs coaching around what activities. Activity-based selling turns reactive management into proactive leadership.
This isn’t a radically new concept. Frankly, it’s the fundamentals of running a strong sales organization. But far too many sales teams overcomplicate it, get lost in the day-to-day or keep this data buried in reports and spreadsheets. But those who do it right experience immediate and lasting ROI.