Is Your Connection Between Quota and Sales Productivity an Illusion?
Editor’s Note: This guest article by Nancy Nardin originally appeared on her blog as “Why Your Focus on Quota is Killing Your Revenue.”
Most organizations live and die by quota. Quotas are derived from financial projections which are created and necessary for companies to operate. We rely on quotas as a method for measuring sales rep performance. They need to have a number to shoot for and we need to know whether they are performing as expected.
In many ways, it’s easy to understand why we focus so intently on quota. It’s how we measure the health of our organizations. However, by relying on quota attainment to tell you whether you’re generating enough revenue, you’re doing what magician’s refer to as “following the other hand.”
The Magic Behind Sales Productivity: Don’t Be Disillusioned by Quota
In essence, magicians know if they can direct your attention to one hand, they can use the other to conceal the quarter. The more elaborate “magical” tricks make use of smoke and mirrors not unlike how some people construct forecasts. The real magic to driving radical revenue growth resides in understanding sales productivity and how our reps spend their limited sales capacity. You lose sight of that when you focus on “hitting the numbers.”
If I were to ask you to think about how much revenue you’ll bring in this year your mental mathematical exercise would look something like this:
- So far, we’ve booked x amount ytd
- Remaining quota is y
- Our forecast is Z.
- Therefore, we’re [above, below, or right] on target.
You’ve got a pretty good idea what to expect in terms of revenue. And the reason you do is because you have a quota number that helps you calibrate your answer. Let me direct your attention to the other hand for a moment and ask a different question.
Are your reps generating as much revenue as they could be?
“You can’t increase sales productivity (and revenue) without assessing (and doing something about) how salespeople use their time spent.”
Nancy Nardin, Smart Selling Tools
There’s no way to calculate that answer based on quota attainment analysis. Quota attainment only tells how your team is doing compared to what’s expected of them. It tells you what they should be selling. It doesn’t tell you whether they’re selling as much as they could be.
Are your reps generating as much revenue as they could be? The answer to that question will most certainly be “no.” Understanding why the answer is no — or more precisely, what’s keeping your team from selling as much as they could be selling — is the key to radically increasing revenue in the future.
You can start by asking yourself these questions:
- Why aren’t we talking with a higher number of qualified prospects?
- Why are we talking to too many poor-quality prospects?
- Why aren’t reps able to hold more effective, relevant conversations?
- Why aren’t we consistently getting great call results?
- What’s keeping us from moving deals down the pipeline?
- What’s keeping us from moving deals down the pipeline faster?
These are sales productivity issues. Instead of sales productivity issues, managers often spend their time looking at: what’s in the pipeline, what are we forecasting and what is the likelihood those deals will close. While those are good questions to ask, they will not uncover barriers to sales productivity that depress revenue. You can’t increase sales productivity (and revenue) without assessing (and doing something about) how salespeople use their time spent.
Salespeople have 215 selling days or 1,720 hours a year to sell. That’s their total available sales capacity. This doesn’t tell the full story however. Studies of B2B sellers have shown that on average only 35% of this time is spent communicating with prospects. That is the equivalent of a mere 602 hours per year (50 hrs/month). This 35% statistic is an important metric because it puts an upper boundary on how much revenue you can generate. If 35% of a salesperson’s time is spent communicating with prospects, their revenue will be limited to the deals they get from the people you communicate with during that amount of time.
What would happen if you could increase the time salespeople spent communicating with prospects from 35% to 50%? Their available selling time goes from 50 hours a month to 71.6 hours a month. Salespeople can use that additional time in two ways. The first is to talk with more people. The second is to better plan and prepare for each conversation so they convert more deals to the next stage in the pipeline.
What do salespeople do with 65% of their time? An Example From UPS
To free up 21 hours a month you’ll need to look at where that time is being used today. If reps spend only 35% of their time communicating with prospects, what are they doing with the remaining 65% of their time? You’ll need to determine which of all of their tasks represent the biggest unproductive consumptions of time. Fortunately, this is often an easy task. You just have to pay attention and take notice.
The story of UPS drivers making only right-hand turns is now legendary. Apparently, making left hand turns consumes more time and fuel than making right hand turns. You may have even wondered about this yourself when sitting idle at a traffic light waiting for the left-turn arrow to turn green. Someone at UPS decided to test the theory that avoiding left turns altogether would lessen the overall time of each route. Could it be that an act of noticing and questioning a common daily occurrence led to a right-turn only policy? Seems almost too simple, yet the company says its package flow technology combined with right-turn routes saved nearly 29 million miles, and three million gallons of fuel.
There are similar examples to be found in the world of sales. And likewise, you can eliminate wasted sales time by examining the root cause and applying technology and process.
For example, how much time do your salespeople spend looking for the most relevant sales content to present to prospects? What percentage of the time are they successful in their search? How much time do salespeople spend trying to quantify the ROI and value their solutions will bring to prospects? What percent of the time are they successful? How much time do salespeople spend trying to navigate through accounts and determining the most appropriate sales strategies? What percent of that time do they end up with the best action plan?
You can help your salespeople get more from their limited time when you understand how it’s being used today.
How exactly do you manage your sales team?
Think like UPS did. Find out what tasks or processes are consuming too much time. Uncover what’s keeping your reps from spending more time with real prospects. Conduct what we call Sales Energy Audits. Start with a frank conversation with your salespeople and ask them where the time drains are.
Then take what they say seriously. It’s tempting to wave off complaints and to discount their comments. The important thing is to make sales productivity a management imperative now that you know how small changes can lead to big returns.
The truth of the matter is this — you have the power in you to help your company generate a great deal more revenue than it is today without hiring new reps, and without introducing new products or entering new markets. And you have five months to prepare for 2014.
All you have to do is commit now. Commit to not letting another month go by without launching your investigation into barriers to sales productivity and to finding the right tools and processes to free up more time for communicating with prospects.
Quota is important but it doesn’t hold the key to explosive revenue growth. If you want to pull the rabbit out of your hat, you’ll need to follow the other hand. The one where the real magic is taking place. And that’s all about sales productivity.
What are the “left turns” in your sales process? What are you doing to become more efficient?
Photo by: CRASH:candy