ACHIEVING ORGANISATIONAL ALIGNMENT
One of the biggest problem impacting sales performance we see in many European sales forces is the lack of direct linkage between three elements:
- Corporate goals
- Sales strategies
- Sales force behaviours
The three elements are frequently allowed to operate independently with the tacit (and often wrong) assumption that these three elements are all aligned and working toward a common end. In fact, this lack of ‘organisational alignment’ is often cited as a top concern of senior executives.
From our experience and research highlighted in the recent book Cracking the Sales Management Code®, written by Jason Jordan and Michelle Fazzana one of the key success factors to aligning an organisation from top to bottom is to ensure the right business metrics are in place to guide and measure success.
We also learned in 2014 that companies who are well aligned realise more sales growth and companies using best practices enjoy at minimum 5% incremental sales volume growth and 38% better at closing proposals compared to poorly aligned organisations (Mathmarketing Alignment Study). That is already much better than the recent Financial Times article that forecasts an expected rate of 0% to 1% economic growth for Europe in 2015.
While many companies and senior leaders agree with the importance of business and sales metrics, we have seen numerous business struggling to get alignment within the organisation on these metrics. Recent research we conducted into how leading companies measure and manage their sales forces gives us some fresh insights into how to tackle the challenge of organisational alignment through the use of an integrated set of metrics.
THE VEHICLE FOR ALIGNMENT: METRICS
A key finding from our experience and from research highlighted in the recent book Cracking the Sales Management Code®, written by Jason Jordan and Michelle Fazzana, was that there are three distinct levels of metrics that can (and should) be used to measure and manage a sales force.
First, there are metrics of Business Results. These measures such as revenue, profitability, market share, or customer satisfaction are viewed at a company level and are used to report the overall health and success of the organisation. These metrics are not ‘manageable’ per se, since no individual can directly control them. No matter how many times a CEO instructs a VP of sales to ‘make’ their revenue number; the VP cannot turn around and command the number to change. There are numerous factors that affect overall Business Results, and many of the factors are out of the sales force’s control.
Second, there are metrics of Sales Objectives. These are measures such as customer retention, new product sales, market coverage, opportunity win rates, or sales force turnover that constitute the sales force’s success at achieving specific goals. These metrics are not directly ‘manageable’ either, since you cannot, for instance, command a customer to buy from you. However, these measures do provide guidance for what the sales force should hope to accomplish. They are, as named, the objectives that any sales force pursues.
Finally, there are metrics of Sales Activities. These are measures of activity such as the volume of sales calls being made, number of customers assigned to each salesperson, percentage of salespeople using CRM tools, or the amount of training provided to the sales force. These metrics are directly manageable, since a front-line sales manager is absolutely able to demand more calls, reassign customers, enforce tool usage, or increase training for their reps. In fact, this is why sales managers exist … to ensure that their salespeople are doing the correct things correctly. Sales managers in Europe need to be focused on these activities as they are controllable and manage sales teams to ensure they work on the right activities that will support the defined objectives and finally deliver the results expected.
One of the most important insights from our research is that there are direct cause-and-effect relationships between the levels of metrics. That is, Sales Activities drive Sales Objectives, and Sales Objectives drive Business Results. For instance, if your salespeople are instructed to make more calls (a Sales Activity), they should be able to cover more of a given market (a Sales Objective). All other things being equal, greater market coverage should lead to greater market share (a Business Result). There is a clear chain of events from one level to the next, and there must be linkages between the levels to ensure that the activities of the salespeople will ultimately lead to the achievement of overall results.
THE ROLE OF ANNUAL PLANNING
To ensure organisational alignment, this chain of events must be reverse engineered – a task is best performed during your annual planning process. If your strategic goal for the year is to increase market share, then you could set an objective for the sales force to increase its market coverage. To achieve this objective, you could instruct your salespeople to boost the number of sales calls that they make throughout the year. And, of course, you could use the planning process to set explicit targets for market share, coverage, and sales calls in order to measure and manage progress toward the goals.
However, our observation is that many annual planning exercises never get to this actionable level of detail. Walk into any sales department and ask someone at random what their Sales Objectives are for the year, and their response will most likely be “to make my quota.” While this answer is in some ways unassailable (certainly we want all salespeople to make their quotas), it is also highly problematic.
This response reveals that the annual planning process probably never moved beyond the top layer of metrics – Business Results. This is not an uncommon scenario, of course, where the corporate revenue target for the year is broken into progressively smaller chunks (first by country, then by region, then by district, etc.) until each individual salesperson has a revenue number stamped on their foreheads. Yet, assigning a revenue target to a salesperson is not sufficient to ensure they achieve it.
A more effective planning process does not end with the dissection of Business Results. It proceeds to identifying the Sales Objectives that will lead to those desired results. For instance, if you intend to grow your revenues by 10% next year, you should identify how you will achieve that growth. Your new Sales Objectives could become to acquire 10% more customers next year, or sell 10% more products to your existing customers, or even raise your average purchase price by 10%. Whatever your plan of attack is, you must put deliberately conceived one in place.
Once you have identified the Sales Objectives that you want to achieve, you must then determine what changes in your Sales Activities will lead to the realisation of those objectives. For instance, if you decide that your preferred objective for the year is to acquire 10% more customers, then you might need to generate 10% more leads or hire 10% more salespeople. Whatever your objectives are, you need to make tactical changes in your selling activities, or else you will be simply asking for results and hoping for the best.
In addition many companies conduct quarterly operational plans and updates, these present a good opportunity to ensure that the sales teams are working on the relevant activities. It is also important to make sure that there is a good alignment between what marketing is doing and what sales is doing in order to see both going in the same directions. Remember that marketing go-to-market teams execute activities to generate new sales leads, and that sales managers ensure that their sales teams are effective in pursuing these leads.
IMPLICATIONS FOR EUROPEAN SALES LEADERS
Organisational alignment is possible, in fact assured, if everyone’s performance metrics are thoughtfully integrated. You accomplish this by starting with your desired Business Results and then identifying the changes in your Sales Objectives and Sales Processes that will guarantee those outcomes. By designing a set of interrelated metrics, you can measure success at all levels of your organisation and drive the specific behaviours that will lead to overall success.
This year, don’t just assign a quota and assume it will happen. Instead, provide specific guidance on how to achieve it, then measure and manage progress along the path to success.
Interested in more content on the topic?
- Register for one of our training sessions ‘Cracking the sales management code’ to get live tips from experts and learn how to apply these best practices within your team
- Read the second article of this blog series on the best practices in measuring and managing a Sales force
- Download the first chapter of the bestselling book Cracking the sales management code®.
Source of article: Vantage Point Performance