What do sales analytics, sales utilization and Legos have in common? (Part 2 of 3)By: Mike Meisenheimer Sales Analytics
In part 1, we shared that sales analytics, sales utilization and Legos have some important characteristics in common. Like Lego® bricks, sales organizations can be assembled in several configurations, resulting in very different outcomes. We introduced the notion that in their current “builds” many organizations suffer from under-utilization, impacting sales productivity from 5 – 25 percent. We introduced the sales utilization framework as a tool to help Sales Master Builders design and build highly productive sales organizations.
The Problem. The problem is, too many leaders overlook the full picture of sales utilization and the impact it has on building an effective sales organization. It’s like wanting to build something cool with Legos but not having the instructions to do so. With the advent of “Big Data” and improved technology, most sales leaders do not suffer from a lack of metrics. But do they put the right metrics together in a way that provides the best insights (i.e., providing a proxy for instructions)? Measuring asset utilization helps with funding allocations, initiative prioritization and objective setting. Just as other parts of the enterprise track the utilization of assets (production lines, inventory, financial assets), so too should the sales function monitor sales utilization on an ongoing basis to ensure the success of the annual plan. So measuring sales utilization is a good thing. But how does a Sales Master Builder get started?
The Instructions. Most Lego sets sold today come with a step-by-step set of easy to follow instructions. Building (and rebuilding) a sales force is not quite the same, but the Alexander Group’s Sales Utilization Framework serves as a valuable guidebook of design principles for sales leaders. It has five parts or chapters: Investment, Alignment, Execution, Perception and Results. We introduce chapters 1, 2 and 3 in this post and chapters 4 and 5 in part three of this blog series.
Chapter One: Investment. Are you investing in the right sales assets? If you want to build the Millennium Falcon out of Legos, you need to have the right pieces in the right quantity. Too many and you have lots of pieces left over that don’t get used; they are under-utilized. Too few and the ship doesn’t have a laser or defense shield, leaving its passengers exposed when the enemy attacks. Sales investment is similar—you have a limited budget but you must spend it wisely. How you spend it drives everything from headcount, customer coverage, enablement and field marketing programs. The metrics to evaluate sales investment should include Expense-to-Revenue, Compensation Cost of Sales, Enablement per Rep, and Total Sales Cost per Rep. Determine the right set of metrics for your organization but recognize their strengths and weaknesses. For example, Sales E/R is one of the more common investment-related metrics. The typical organization spends approximately 20 cents per dollar of revenue on sales. While E/R is useful as a directional indicator, it is not an effective predictor of sales performance. Sales leaders should balance using total Sales E/R with other metrics such as dollars per organic or discrete quota-carrying rep. This will help leaders to evaluate the right balance of discrete quota-carrying reps (basic sales building blocks) with lead generation roles, specialist roles (product, technical, vertical), channel roles, management roles and support roles (those fancy and unique Lego pieces) to ensure the right coverage model design. Several factors drive these decisions including your industry, your organization’s size and stage of growth, your market and account segmentation and targeting model and your growth aspirations.
Chapter Two: Alignment. Once you’ve determined the right level of investment, you’re ready to build. Like assembling Lego bricks, Sales Master Builders need to place the right sales resources against the right customers and make sure the programs, tools and processes are in place to help them focus on the right priorities. This includes defining the right sales motions and having sales playbooks for each to guide the selling process. Sales territories and account assignments must be balanced, appropriate quotas set, and of course, sales compensation plans designed by role to align with the company’s sales strategy. To diagnose utilization, look to metrics that gauge alignment such as territory realization, playbook adoption and engaged selling time. How the different pieces get put together can mean the difference between the Legos turning into a race car, a house or that killer spaceship.
Chapter Three: Execution. Let’s say we built a Formula 1® race car out of our Legos. Now we ask, are we racing it around the office or is it just sitting on the desk? For sales leaders, this translates to whether the sales team is delivering what’s been asked of them. If we targeted a new customer segment this year, are the sellers calling on those accounts? What about that new product that was just launched? Is it being promoted or are we continuing to focus on our legacy solutions? And how do we know? Several metrics can help us evaluate sales execution, most of which center around activities and process. Look for metrics that relate to the specific strategy being pursued. New logos, new product sales, customer retention and penetration are good lagging indicators. While account prioritization, pipeline metrics (size, shape, velocity) and lead generation are good leading indicators for evaluating execution, we want our sales build to work and work well. The Lego race car might look cool, but if it’s slow and fragile, it won’t get the job done and will require some redesigning and rebuilding.
We’ve had a bit more fun thinking about sales utilization and its similarity to Legos. Whether the similarities are real or contrived, the concept of utilization is one that sales leaders need to consider. Understanding and monitoring utilization is important to clarify decision-making and maximize sales productivity. In part three of this series we’ll focus on the feedback dimensions of sales utilization: perception and results (chapters 4 and 5). We’ll also bring the chapters back together to cover prospective next steps for executives looking to diagnose utilization in their own organizations.
To learn more about Sales Analytics or share your own Sales Master Builder story (or Lego story, for that matter!), please contact us.