Sales Performance Management - Are You Big Picture or Activity-Driven?

There are many challenges to rolling out meaningful individual objectives as a part of your Performance Management system.  One of the biggest?  Sales Performance Management - do you care about how they get to the number as long as it happens ethically?  Or do you want to track the activities that contribute to it?   Are your reps Tommy Boy (it's all about the relationship) or Glengarry Glen Ross (leads="sits"=signed contracts)?

My experience?  The bigger the sales job, the less metrics are tracked.  Companies usually don't do Sales Performance Management per se.  Instead, since the sales department usually has the biggest scoreboard available (i.e. results, actual sales vs. quota), the sales comp plan as defined by quota usually serves as the performance management plan.  Miss your monthly number/quota too many times, and you are on a formal plan.    Pretty simple...

Is tracking the behavioral activities that drive results necessary for sales organizations?  There are many different opinions on the topic.  First up, from Incentive Intelligence:

"Most of the time the specific metric you want - the one relating to the behaviors - is not captured or tracked.  Many companies will take a short cut and go directly to those things they currently measure and use that as a proxy for the real behavior they want to impact. 

As an example:  The company wants to increase sales.  They determine their sales force has the most impact on that objective so they target their sales organization for an incentive program.  They know that they have a high probability of sale if the sales people follow a specific process.  However, they don't track those steps.  They train and communicate the steps - they rely on sales management to reinforce those steps in their "huddle sessions" - but they don't officially track those steps.  Therefore, when they announce the incentive program they use "sales" as the reward event.  Those who sell, get the reward - all based on the assumption they are following the steps. 

But as we all know - there are many ways to skin a cat and rewarding the sales event will increase the salesperson's desire to short cut the process, creating a lot of work with less than desirable results.  What the company should do is reward the steps to the sale.  So to really drive behavior and impact the business on a sustainable basis the company should create new metrics for their incentive program."

That would seem to indicate a need to track activities in the "sales funnel" that are known to lead to increased sales - prospecting, calls, appointments, presentations, etc.   However, most sales execs I have known are loathe to make that a part of how they measure reps from a performance management standpoint, much less incent them for those activities rather than their actual results.

Ann Barnes of Compensation Force recently interivewed David Chichelli of the Alexander Group, a leading expert on sales comp.  His feedback on the topic appears below:

"The most common and negative mistake is using too many performance measures.  The rule of "no more than 3" is the best advice.  And, these 3 results should be related to the sales results of the seller.  The following measures should be avoided:  corporate or division measures, compliance measures and activity measures."

So the trend continues - the sales experts say the details are demotivating and don't matter, the organizational sme's wonder if we shouldn't be measuring more than the final score to drive the right behaviors.

Me?  I'd love to see a performance management system where Sales Reps get the annual review, but if they make the annual number they are at least a "Meets", then use the rest of the review strucuture to formally emphasize the behaviors, and how their strengths and weakenesses in each could help them become an "Exceeds" and put more money in their pocket.

Comments

[Paul Hebert]

You're right on the money. There are two things to consider - the process and the result. In order to achieve the results you need to reinforce the process. Without results however, there is no income, profit or success so there's no money to reinforce the process.

Creating a two tiered strategy that rewards those that follow the process but still pays people when results are achieved reinforces all the objectives. The real issue comes down to the balance in the value between process and results. If there is an imbalance (more reward on process or more on results) it will skew your overall results. More importantly, the award values (whether they be cash or non-cash) communicate your values as an organization. Too much reward for results communicates you don't care about process. Too much on process and you don't communicate that performance overall matters.

Tough choices.

[Ann Bares]

Great discussion!

I agree with David Cichelli that the sales incentive plan should contain a few, important metrics - and typically (but not always) these should be measures of results, not activities. But we must avoid the easy trap of thinking that the sales incentive plan is the only management tool in place here. Sales incentive plans play an important role in managing and recognizing salespeople, but not the only role. These plans - as you point out, Kris - are no substitute for sound performance management, which should track and reinforce the also important behavioral and process elements of executing sales strategy.

Paul is right to point out the critical balance here between emphasizing process and results. Too much emphasis on results-oriented incentives (by, for example, making them too big a component of overall compensation) - or too much emphasis on the process/behavioral aspects (by having a too small or nonexistant reward for results) can produce problems. It is indeed a delicate balance, full of tough choices

[Wally Bock]

When a company has a good sales process, that process is best used in the coaching, not the incentive part of management. An industrial consumables manufacturer I worked with knew that a structured process of X calls to get y appointments to do Z demos would result in sales. The sales manager can use that process to determine what needs to be worked on. But the same sales manager can leave top producers alone.

[Paul Hebert]

Wally,

I agree that in the coaching part of the process is critical - especially with new sales employees (new to the company - not just new to the job) to ensure that the company culture and "way of doing business" is reinforced.

As sales folks get more experience they should have less of a need to be coached on the basics. However, even the seasoned veteran will need to be reminded of what the appropriate process is at some point in time to continue to increase their skills.

There is a reason professional sports figures still drill on the basics.

My biggest point was to separate the process from the result by using non-cash vs. cash incentives to ensure that we don't create a situation where someone confuses the real goals of the position (in this case selling.) We always want people to focus on the long-term objective - but continually reinforce the short-term tactics that get us there.

BTW...coaching is in effect a form of incentive (recognition actually) because it drives ongoing conversations and connections between the "boss" and the employee. We can't overlook in today's hustle and bustle world just how important having conversations about performance can be to reinforcing appropriate behaviors.