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For years, I hosted a weekly poker game with my sales team. We worked for one of the biggest tech companies in the world at the time and the sales team was ultra-selective. These were some of the brightest people in the company. One of my teammates, who also was one of our best sales reps, was notorious for never folding his favorite starting hand, which was a Q and a 9. After weeks of hearing about how much he loved these starting cards, I finally explained that this hand was mathematically inferior to my favorite starting poker hand, two aces. He was certain that I was wrong.
He loved the Q9, and was convinced that he won the large majority of times that he started with this hand. I proposed a bet. We would each start with our favorite hand. We’d play out the remaining five cards 100 times. For each time he won, I would pay him $2. For each time I won, he only had to pay me $1. We played out the hands and something amazing happened. No, he didn’t beat the odds. He lost money. The amazing thing was the extent of his surprise and dismay. In truth, starting with AA, I was a 5:1 favorite against his Q9 before the first community card was played.
This guy was smart, but his faith in his method had become so strong, that he didn’t feel the need to even explore the underlying math. This kind of thinking is absolutely standard among sales people. In fact, it’s probably required. Knowing that you’re going to pick up the phone 10 times to get one sale, you have to have a bit of a gambling streak and a healthy disregard for the odds. The pain that sales teams experience from this thinking, though, is that it can lead even the best salespeople to ignore some fundamental facts about pipeline math and rely on hope to make their numbers. Below are the three facts of life that every sales team should face to ensure they are getting the most out of their data.
Pipeline activity is the single best predictor of sales success.
When we look at our sales teams across dozens of clients, selling a huge variety of products, one thing is persistently true: the best performers over long periods of time are the reps who have the most active pipelines. This activity needs to be measured by progress from the prospect, not the rep. A rep can send a thousand emails and get absolutely no result. By measuring progress in your sales pipeline, you can eliminate the need to figure out if your sales team’s activity is productive or not.
Walk your sales reps through the math. It takes X number of leads in Y stage of the pipeline over Z number of days to make a sale. Of course, there will be small, short-term variations by rep depending on close rates and lead quality, but this math will hold up over time. By showing your sales team the exact math that goes into making a sale, you can reduce the tension that can be created by just asking them to work harder. The pipeline math is an objective way to show them why you’re asking for more activity. Don’t accept that one person on your team can persistently meet targets without doing the top-of-pipeline work necessary to sustain performance. Low activity at any stage of the pipeline will catch up with even the most talented sales person.
Close rates are basically the same for all reps.
One of the most common misperceptions in sales is that the best reps close at significantly higher rates than the lowest performers. Data simply doesn’t support this perception across most organizations. Over time, the variance in close rates tends to be very small across reps. Of course, you’ll always have reps who have a killer month or even a killer quarter. In the long run, even the best reps will close at only slightly higher rates than average reps. Close rates vary dramatically by lead source, but if one of your sales people is crushing her teammates in performance, it’s a near certainty that she’s just working harder and talking to a wider variety of prospects. To be even more precise, she was probably working harder Z number of days ago.
You can’t afford to have sales managers who are ‘not math people’
Knowing the details of your sales data, and understanding what it can tell you about your team’s performance over time are absolutely essential. Every sales manager should have a basic understanding of what metrics to watch, why they should be watched and how to explain them to the sales reps. Sales reps are gamblers and risk-takers by nature. They won’t intuitively do the math, nor should you expect them to. That’s what your sales managers are for. Trust me; you don’t want to hire math enthusiasts as your front-line sales force. If you have great sales managers who aren’t good at math, ask them to get better. They can do it, I promise.
Managing sales people is always going to be an inherently human, non-formulaic function. There is no exact formula for getting high production from your team. However, you can and should use data to make sure that your sales people are not setting themselves up to always be fighting the odds.
Photo credit: blog.reidreport.com