You’re making or exceeding your sales goals, senior management is happy, sellers are happy with their commission checks, but there is a lingering question in your mind: Can we be more efficient? Sales organizations historically lack consistent and predictable ways of measuring the efficiency of sales. Metrics, like Cost-to-Sales-Revenue Ratio, can vary dramatically depending on industry and the maturity of your company. And the Net Sales Efficiency Score has yet to be developed.
So, you can either rest on your laurels and think about the next President’s Club trip, or you can examine other predictors of sales efficiency. Here are some measurements to consider:
- Quota attainment – don’t just focus on overall quote attainment. Instead, look at the distribution of quota attainment. If a few high achievers are bringing up a lot of below average performers, you may net out to goal attainment; in reality, though, there’s room for improvement. Implementation of consistent sales processes and sales management cadence can elevate performance by 7% points (according to a CSO Insights survey: 2014 Sales Performance Optimization Study) and increase overall efficiency.
- Productive selling time – you would be surprised how much seller time is still spent performing non-value added activities, such as administration and driving time to meetings that could be conducted via phone. Survey your sellers to determine how they are spending their time and identify process improvements, technology, and virtual meetings that can be conducted in order to improve the amount of time your sellers are actually selling. According to the CSO Insights survey, on average only 37% of seller time is spent selling (face-to-face, phone, web). Also, look at how much time managers are spending in the field and coaching sellers; typically, you will find room for improvement here, as well.
- Employee attrition (voluntary and involuntary) – while some attrition is healthy, high amounts of voluntary and involuntary attrition can be expensive and impacts your sales efficiency. It typically takes months to onboard a new seller, and high attrition can be demoralizing to a sales force. High involuntary attrition can indicate gaps in the hiring and screening process, while high voluntary attrition can indicate poor sales management, compensation plans that are not competitive, as well as gaps in the hiring and screening process. According to the CSO Insights survey, average voluntary attrition is 9% a year, while average involuntary attrition is about 8%. So, if your rates are higher, you should seek to understand why and make improvements.
- Customer attrition – losing customers can be expensive and inefficient; the cost of acquiring new customers is significant, and even companies in high growth mode can benefit from lowering customer defection. Measure customer attrition and seek to understand why customers leave. Use these predictors to help identify future defections so you can address them proactively in order to reduce future defections and improve efficiency. According to a recent Harvard Business Review article, “Zero Defections: Quality Comes to Services,” cutting customer defections in half will more than double a company’s growth rate.
So, while there is no silver bullet, measurement is still important in order to identify areas of sales efficiency improvements. Start with a few measurements, report on them and monitor the trends. Focusing on these measurements, in addition to sales goal attainment, will help ensure you are optimizing the efficiency of your sales organization.