Ever run out of gas in your car? Maybe it was inconvenient, maybe it was a real hassle. But what if you were racing at Monaco and running out of gas on the final lap cost you $25 million? This is the third of a three-part series on metrics. In the first segment we presented the need for clear and consistent sales operating performance measurement, to support predictable, sustainable, and continuously improving business results. In the second, we discussed in some detail the issue of forecasting. Here, we’ll look at how to look at metrics.
The underlying premise is knowing how to manage your sales projects and pipelines to provide actionable information, as opposed to historic results that tell you how you’ve done. The latter is helpful in keeping score and doing longer term planning and strategy setting. But it’s the details of how a system is actually operating right now, and how this compares to normal, that allows you to make midcourse corrections.
For instance, there are probably two or three gauges that really matter on your car’s dashboard:1) fuel, 2) speed, and 3) temp. Let’s take the temperature gauge as an example. If the gauge reports the engine temperature is 312 degrees, that tells you something. Yet most car temperature gauges don’t even have numbers they show cold, hot, and a normal range. Knowing the exact temperature is less helpful than knowing everything’s normal.
A gas gauge tells you other kinds of information, like you’re full, empty, or somewhere in between. And if you have a rough idea of your car’s mileage and tank capacity, you can do some quick math to decide whether you can make it to your destination without stopping (or you can hit the “range” button on the car’s info system).
And the speedometer provides you yet another bit of information in this case, with specific numbers attached. All three are important, and their priority of importance can change based on your circumstances, but it’s worth noting the character of the item being measured determines how it’s reported.
Temp varies very little over extended periods of time just alert me if that changes. Fuel is constantly changing, but not very quickly remind me if you think I’ve forgotten to look at it (passively with a red zone painted on the gauge, proactively with a little gas pump symbol that lights up, aggressively with a chime and flashing warning). Speed is constantly changing, and the variances may be large or small; report it all the time, and I’ll keep track of minimums and maximums to adjust.
All of these gauges evaluate specific situations and provide you feedback: timely (you don’t want to know the engine was too hot 10 minutes after it’s seized up), objective (degrees Fahrenheit or Celsius), consistent (plus or minus 10 degrees), relevant (temperature now, not last trip), and individualized (this car, this time, this driver, and so on).
Sales has similar variables to measure and monitor once you’ve defined a standard against which to measure (read: process) and have an ongoing and consistent method of gathering and evaluating data (CRM). And like the different gauges, you probably want their reporting to be consistent with how quickly these factors can change, how significant the impact is or can be, and knowing what way things are trending.
Various sales metrics include overall sales cycle length, individual step times, close rates, pipeline fullness (both in terms of number of opportunities and potential revenue value in the pipe), fall out, and prospect quality, to name just a few.
CRM applications today incorporate analytics, and some go further employing AI. For example, most CRM dashboards will give you “snapshots” of your data. The sales equivalent of a temperature gauge giving you the temp only (for instance, 312 degrees) is a system that tells you “your pipeline currently contains 150 percent of plan requirements.”
That’s great. Sounds good. But if the bulk of that is at the front of the pipeline and we’re at the end of the year, maybe not so good. If the increase came right after an event or campaign, but has not been qualified beyond initial screening, the excess loading of opportunities may represent a burden, rather than real potential.
Trends become increasingly important, like the “normal range” on the temp gauge and the “red zones” on the fuel gauge and tach. To look at trends a helpful tool is a control chart. Figure 1 shows a control chart for Metric 1. What this chart depicts is the mean performance and “normal variance” for a given metric.
Let’s say this metric is tracking the number of deals in Paul’s pipeline each week for the past six or seven months. What we see is Paul runs on average about 19 deals, plus or minus four (15 to 23). We now can see Paul’s normal range and see that he’s running normally for Paul.
Now look at Figure 2, which contrasts Paul’s activity level with the rest of the region. With this added information, you can immediately see that he’s well below average. The regional average is 27 or 28 (plus or minus a couple).
We can also see that while the region was operating “in control,” over the past five weeks the average territory has broken above the 30 barrier, even as Paul’s number of opportunities working has fallen off. Somebody knows something that someone else doesn’t. Perhaps the region isn’t qualifying as rigorously as Paul; perhaps Paul is interviewing outside the company. Maybe marketing has been neglecting Paul’s region or industry.
There are many possibilities and one chart doesn’t tell the whole story, but like the gauges on your car and the experience with which you interpret them, having this kind of information over time tells a lot.
Also, being above or below average isn’t necessarily good or bad. It depends on what you’re measuring. If the metric in this case was not number of opportunities in the pipeline, but total sales cycle time, then it appears Paul has figured something out even as the rest of the region goes out of bounds (outside normal variance) the other way.
If Paul’s customers are just as happy as anyone else’s, then it would be worth exploring whether he’s learned something unique that could speed cycle times and be shared with teammates.
If you haven’t already done so during the shelter-in-place lockdown, watch “Drive to Survive” on Netflix. It documents the 2018 and 2019 Formula 1 seasons.
It also shows that dozens of computers with hundreds of sensors are monitoring each car before, during and between races, so that incremental adjustments can be made to tires, wings, etc.
Sure, you can drive your car without any of the gauges we described, and conceivably a well-tuned engine and a talented driver can still win races without all the support of a high-tech team. But in a highly competitive, highly professional, high-payoff environment, it’s incremental improvements that win more often than not. And running out of gas on the final lap is really bad news.
Are you and your sales force still driving by the seat of the pants?