What is Sales Productivity?
Sales productivity measures the efficiency of a sales organization. It compares the number or dollar value of positive outcomes against the resources required to drive them.
Maximizing output while driving down resource requirements is the goal of organizations seeking to improve their sales productivity.
What are Sales Metrics?
A sales metric is any quantitative data point that measures individual, team or organizational achievement against identified key performance indicators.
While there are some commonly used sales metrics like win rate or quota attainment sales organizations often define unique KPIs based on their knowledge of their business. These KPIs answer key questions regarding the health of an organization and offer direction for leaders as to where they can explore their data for additional insight into how to improve the business.
Challenges in Measuring Sales Productivity
Measuring sales productivity is a common challenge for sales leaders. This fact is something of a paradox because sales leaders enjoy access to a wider array of tools than ever before. Herein lies the problem: sales productivity measurement becomes confusing as leaders deliberate over which analytics to monitor. This challenge intensifies amid the sprawling data enmeshed within Byzantine CRM systems.
The answer to these challenges is to isolate a set of key sales productivity measurements that can be sourced from data that is easily accessed. This step, however, is only the beginning.
Effective measurement of sales productivity improvement requires more than identifying the meaningful data. The most successful organizations take the time to articulate how they will use the data. They think about follow-through by connecting analytics to action.
Sales Productivity Metrics
Now we will explore the sales metrics that are good indicators of the health of your organization’s sales productivity. With these measurements, sales organizations can become more intentional in the pursuit of revenue goals. Some of these are “rearview” metrics that look at what happened. Others are “windshield” metrics that look at what is ahead.
Sales Cycle Duration
Sales cycle duration gives leaders a quick read on how long it takes the sales professional to bring a sale through all stages and to completion. This metric is more relevant than ever as sales professionals become increasingly burdened with non-selling activities. These administrative tasks demand time and focus that could otherwise be directed toward selling.
Leaders must remember that a measurement like sales cycle duration must be viewed within context. That is, a short sales cycle duration does not necessarily signify productivity. In some cases, a short sales cycle duration may be the result of a sales professional pushing many small deals through at the expense of revenue targets. Therefore, leaders should balance this measurement with a review of average deal size. If the sales cycle duration falls in conjunction with average deal size, the sales leader will likely need to help the sales professional refocus on opportunities that generate more bottom-line revenue.
The pipeline-to-quota ratio is calculated by dividing the total value of a sales professional’s pipeline by their quota. The figure provides a sense of how well the sales professional is filling their pipeline in anticipation of meeting quota requirements. What makes this measurement so useful is that it can be calculated fast and without a lot of data.
Many organizations have different ideas on the ideal pipeline-to-quota ratio. The appropriate goal ratio will vary based on the sales team’s ability to close opportunities. Arriving at an appropriate goal ratio means analyzing historical data to determine what percentage of pipeline opportunities reach closing.
Most leaders will need to pair this measurement with other pipeline metrics like size, shape, and mix. Pipeline size indicates the total value of opportunities in play. Pipeline shape indicates how deals are distributed across different stages of the cycle. For example, a wide pipe (i.e., fat in the middle) signifies that a disproportionate amount of deals is stuck in the mid-cycle stages. In this case, there is likely some blockage to resolve. Pipeline mix indicates the types of products in the pipe. Here, it is important to consider the gross margin of the different products in play. Too many low gross margin products will strain profitability.
Time to Productivity
Time to productivity looks at how long it requires a new sales professional to close their first deal. This metric reflects several competencies. First, reaching productivity early indicates the strength and efficiency of the onboarding process. The earlier the sales professional can adopt the selling methodology and CRM technology, the earlier they can bring opportunities across the finish line.
Second, an optimal time to productivity figure signifies a strong support system. When coaching and team dynamics are strong, new sales professionals are better positioned to leverage the full value of the selling organization’s resources.
Third, time to productivity becomes an especially powerful metric when combined with a review of how long it takes a sales professional to fulfill quota two quarters in a row. Combining these two metrics prevents the false sense of progress that can occur when an early win is later revealed to be an outlier.
A player will get more hits the more they swing the bat. A measurement like meetings held embraces this truth. However, leaders need to be careful with how they review this figure. Stacking the schedule with meetings is of little use without attention paid to other factors like the seniority of the customer in the meeting or the type of company in the meeting.
Sales leaders can combine this measurement with more granular metrics like calls placed and emails sent. These figures are referred to as “activity metrics.” They also include the number of product demos performed, referrals requested, proposals sent, and even social media interactions made. Many consider these to be the leading indicators that forecast end results.
The Bottom Line
Getting sales productivity measurement right is important. However, what is more important is simply taking the first step and resolving to put some measurement plan in place. The most effective measurement programs are those that have been revised and improved over time. For many organizations, the above four measurements represent a good, holistic picture of productivity.