The Biggest Mistake a Sales VP Can Make
Dan Perry is a Principal at Sales Benchmark Index.
More than 40% of all Sales Managers don’t make their yearly quota. Their bosses’ first thought is to fire those sales managers because “Who needs a Sales Manager if they can’t make their number?”
How are you measuring your sales managers? Of course quota attainment is critical, but is it only that? In fact, the biggest single mistake Sales VPs make is to just look at quota attainment.
Imagine if you were one of these idiots:
- Walt Disney was fired while he was a reporter at a Kansas City newspaper. They said that Disney “lacked imagination and had no good ideas.”
- Michael Bloomberg missed his quarterly number and was terminated. His former manager said the current New York City Mayor “lacked leadership.”
- After an unsuccessful product launch, Lee Iacocca was sacked at Ford. Henry Ford Jr. rationalized his firing by saying “You are too edgy for the car business.” Iacocca went on to found Chrysler.
- Both Arthur Blank and Bernie Marcus were relieved of their positions at a home improvement chain when they missing their sales numbers. “They can’t sell,” said the owner. The two went on to found Home Depot.
- Mark Cuban was once a sales rep at a computer store. When he failed to open the store on time because he was upselling a customer, Cuban was let go for being “lazy,” according to his former manager.
These were shortsighted decisions based on subjective perceptions of what defined lazy, incompetent, and poor leadership.
When it comes to evaluating your sales managers in your talent management program, consider metrics other than quota attainment. We recommend considering 5-7 additional metrics. This will allow an objective view of overall performance. Additionally, it allows you to fairly gauge future performance. We’ve put together some popular not quota-based metrics below.
Popular Non-Sales Quota Metrics:
- Turnover: The #1 reason employees leave is their boss, but how do we measure that? We found that looking at the following questions helped to determine turnover impact: What is the total turnover for their team this year? And how many have voluntarily turned vs. involuntary? Are you losing strong performers due to a poor sales manager? The lack of great coaching and development is the number one reason sales managers lose top performers.
- Lost Selling time (a.k.a: Open Selling Weeks): You can’t make your quota if you have more than 6 lost selling weeks in a quarter? If you do, then you have a problem. The number of selling weeks has a direct reflection whether your team hits their quota.
- Ramp to Productivity: Ramp Productivity starts when your sales reps receive their offer letter to when they hit ramped productivity level – and the time that it takes for them to hit their ramp quota is also an important factor to look at. Are you aware of your “ramp to productivity” or “ramp failure” rates? Looking at your ramp to productivity and sales cycle length will help you better identify the times to hire. You can’t sit and wait to ‘see’ if the Sales Manager will make it. Time is money – especially in the sales cycle. If your sales managers can’t ramp new hires, this will have a direct negative impact on future performance.
- Sales Team Quota Gap: Are the majority of your sales people making their numbers or is it one superstar saving the day? This is a tell-tale sign of a root problem. Just don’t look at the numbers, see where the numbers are weighted.
- Historical Performance: A history of hitting one’s quota is critical. One or two quarters missed could be just be outliers, especially with factors that are out of their control. Inconsistency though, usually signifies deeper problems.
- Percentage of Sales Team Career Advancement: How many sales reps on the team were promoted to other positions? And those in the past 18 months? Coaching and developing are critical components of any sales manager. Are your sales managers developing people?
- Forecast Accuracy: Submitting accurate and consistent forecasts are telling. Do your sales managers submit these types of forecasts? They do if they have a command over their business.
The important factor here is to measure with non-quota metrics and compare them to quota attainment using our Sales Manager Score Grid. You can see an example below. This tool allows a Sales VP to evaluate their sales staff both quantitatively and qualitatively using a weighted formula based on your set objectives.
You can use different metrics in your equation tied directly into your sales and company strategy. If developing people is important, use the metric mentioned above. Replace it with another metric if people development is not important as something else.
Utilize more than quota attainment when evaluating Sales Managers. Remember that your best Sales Managers may actually be the ones who don’t make their quota on a consistent basis.