Setting sales objectives and achieving them
This is the third article of a series dedicated to help European senior leaders to realise more business growth in 2015. In our previous articles, we shared the importance of organisational alignment and the role of three types of sales force metrics:
– Sales Activities
– Sales Objectives
– Business Results.
We also identified discrete sales processes and when to use them. Now we explore Sales Objectives and their links to selling activities, specifically Sales Force Capacity, Salesperson Capability, Product Focus and Customer Focus.
Every European sales force has certain outcomes that it is trying to achieve such as retaining more customers, cross-selling products and services, or improving salesperson skills. From past client projects and extensive research we categorised these outcomes as “sales objectives”.
In our past articles we introduced the principle that that ‘objectives’ are where the selling effort is directed. Objectives can only be managed indirectly by controlling a salesperson’s activity at the process level (i.e. account management process, opportunity management process).
For example, a sales objective might be to increase the number of new accounts generated, which could be achieved by putting greater effort into sales activities such as cold calling or by visiting more prospects.
You cannot direct a salesperson to have more new accounts, but you can set an objective and manage the upstream activities. Again, managing Sales Activities leads to achieving Sales Objectives.
HOW MANY SALES OBJECTIVES ARE THERE?
Just as we used our analysis to assign sales metrics into distinct sales processes, we also defined our sales objective into four categories.
1. SALES FORCE CAPACITY
Sales force capacity tells you how much available effort you can get from your sales force, and they are used to ensure that there is enough total selling effort to cover all of your desired customers and prospects.
Sample Sales Force Capacity can include:
- % Productive Time for Reps
- % of Market Opportunity Covered
2. SALESPERSON CAPABILITY
It tells you how effectively your selling effort is being applied. That is, if your salespeople have six hours of sales capacity each day to spend with prospects and customers, how successful are they in these six hours to advancing opportunities, winning deals, or accomplishing other desired outcomes of their customer-facing activities?
(Note that a salesperson’s capability is not the same as their skill. Capability includes the skill of the salesperson, no doubt, but it is also a reflection of selling tools, motivation, and other components that affect the effectiveness of a salesperson.)
Elements within Salesperson Capability include:
- % of Calls Advanced
- % of Deals Won
- # of Deals with Discounts
3. PRODUCT FOCUS OBJECTIVES
Those objectives that report whether a sales force is selling the products and services that are deemed optimal to your company. These could be products with higher profitability or products with some strategic value, such as a new line of products. Are they selling the services that are relevant for your business?
Elements within Product Focus include:
- % of New product versus Existing Products
- % of Cross-Selling
- % of Up-Selling
- Average Deal Size
4. CUSTOMER FOCUS OBJECTIVES
They reveal whether the sales force is attracting, retaining, and growing the company’s targeted customers. Examples could be getting or developing customers that are either more profitable for the business or attracting customers that are somehow strategically important, like those in a new market or geography.
Sample Customer Focus metrics include:
- % of New vs. Existing Customers
- % Customer Retention
- % Share-of-Wallet
In sum, these four categories of Sales Objectives provide guidance to your sales force about the things that are important and the things it should accomplish in the field. However, simply communicating objectives or even aligning them with incentives will not create the desired outcomes. To realise them, you must embed them in the sales processes or in the day-to-day activities of your salespeople.
ACHIEVING SALES OBJECTIVES THROUGH FORMAL SALES PROCESSES
Recall that one of our first observations about Sales Objectives was that they cannot be directly managed – they can only be influenced by directing specific activities within Sales Processes. Shortly after we identified the objectives, we began to look for some way to relate them back to the sales processes in a systemic fashion.
We found that processes do have direct causal relationships with objectives. More specifically, certain Sales Processes influence certain Sales Objectives. This means that if you set a new Sales Objective, you should know exactly what to do (in terms of activities) to achieve that objective… You track backward to the processes that have these activities and that have an impact on that objective, and then you manage the activities within that process.
Let’s Suppose a European Sales Director sets an objective for 2015 to improve the customer retention rate of its business. The Director wants to affect a customer focus metric, and there are four sales processes that can influence such an outcome.
- The Sales Force Enablement tools of compensation and coaching could be used to shift the focus of the sales reps toward servicing existing customers
- Use your Territory Management process to allocate more visits to those customers.
- Put Account Management processes in place to help your salespeople become more intimate with key customer issues.
- Within an Opportunity Management process, alter the qualification criteria to limit the number of new prospect pursuits. Of course, you would be managing and measuring these processes all along.
Or, suppose that the European Sales Director was instead to set an objective to increase the percentage of proposals won. Then if the salespeople are in charge of the proposal generation and presentation activities, then this would be a Salesperson Capability metric.
There are four Sales Processes that could potentially affect this objective.
- Execute relevant Sales Force Enablement activities, such as providing proposal templates or training the salespeople on how to craft a winning document.
- Put an action item in the Account Management processes to have the big proposals at that account reviewed by senior management and key stakeholders prior to submission.
- Put an action in the Opportunity Management processes to have each proposal reviewed by relevant internal stakeholders prior to submission.
- Place action items in your Call Management plans to ensure that a manager is involved in the planning of any meeting where a proposal is presented.
For each process, measure and manage all the while.
- Sales Enablement processes are relevant to every category of Sales Objective, since training, coaching, compensation, and other tools can have an effect on any outcome.
- However, Account Management processes will not help an organisation to increase its Sales Force Capacity
- Territory Management processes cannot be used to influence metrics of Salesperson Capability or Product Focus.
Depending on the selling roles in your sales force and consequently the sales processes that you have in place, there are different but predictable ways to manage your sales force so that specific sales objectives can be achieved.
Of course, management’s judgment must be used in all cases to identify the best course of action to influence a given objective. But the process-objective relationships demonstrated here are useful departure points for good managerial decision-making.
IMPLICATIONS FOR SALES LEADERS
By establishing a causal link between sales processes and sales objectives, we gained insight into what has been the missing link in sales performance management; the ability to set specific sales objectives and then manage day-to-day salesperson activities to predictably achieve those outcomes.
As a sales leader, you must first make certain that you have the right Sales Processes in place for each of your selling roles. Then you can set clear sales objectives and make sure that your salespeople’s activities are aligned to achieve these outcomes. With clear objectives and formal process, you have means to set a new strategic direction and ensure consistent execution in the field.
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 last article of this blog series on the best practices in measuring and managing a Sales force
Source of article: Vantage Point Performance