The Most Critical Mistake a Sales VP Can Make

The Most Critical Mistake a Sales VP Can Make:from Sales Force Effectiveness Blog by Dan Perry
Over 42% of all Sales Managers don’t make their yearly number.  A VP of Sales first thought is to terminate those Sales Managers.  “Who needs a Sales Manager if they can’t make their number?”
Are you thinking the same?  You need to ask yourself: How are you measuring your sales managers?  Is it by quota attainment only?  If so, you are making the biggest mistake a Sales VP can make.
Imagine if you were one of these idiots:

• Walt Disney was fired as a Kansas City Newspaper reporter.  They said about him: “He lacked imagination and had no good ideas.”

• Michael Bloomberg was terminated because he missed his quarterly number.  His former manager said:  “He has a lack of leadership”

• Lee Iacocca got sacked for an unsuccessful product launch.  Henry Ford Jr. told him: “You are too edgy for the car business.”

• Bernie Marcus and Arthur Blank were fired from a home improvement store chain by missing one month’s sales.  The owner said:  “They can’t sell”.  They went on to found Home Depot.

• Mark Cuban was fired as a sales rep from a computer store. He failed to open the store on time because he was upselling a customer. “He is lazy.” Said his former manager.

These were poor and short sited decisions. Sign up for our Making the Number Tour to discuss this in detail with your company and customize a SM measurement system.
When evaluating your sales managers in your talent management program, you need to consider a minimum of 5 additional metrics other than quota. This will allow an objective view of their overall performance. It will also allow a gauge of not past but future performance. Below are some common ones to measure. 
Common Non-Quota Metrics:

1. Turnover:  The number one reason some leaves is their boss. What is the total turnover for their team this year? And how many have voluntarily turned vs. involuntary?  Are you losing A players due to poor sales manager?  Lack of great coaching and development is the number one reason sales managers lose A players.
2. Lost Selling time (a.k.a: Open Selling Weeks):  You can’t make the number if you have open sales territories.  The number of selling weeks lost in a quarter or year has a direct reflection on that SM to hit the quota.  Do they have more than 6 lost selling weeks in any one quarter?  If so, you have a problem.
3. Ramp to Productivity (measured from offer letter to hitting ramped productivity levels):  How long does it take for the sale rep to hit the ramp quota?  Do you know your ramp to productivity or ramp failure rate?  Longer than average for the new sales people in the company?  You should be hiring now for 2013 (use your ramp to productivity & sales cycle length to determine when to hire).   You can’t wait to ‘see’ if the Sales Manager will make it.  2103 is too important. If your SM can’t ramp new hires, it is a direct indicator of poor future performance.
4. Sales Team Quota Disparity:  Have many people on the team made quota?  Is one guy saving the day?  This is a tell-tale sign of a root problem. Disparity equates to long term success.
5. Historical Quota Performance:  The history of making quota is critical.  One or two quarter misses might not mean much.  Especially with factors out of a SM’s control. Inconsistency though can lead to deep root problems.

The key is to take these non-quota metrics and compare them to quota attainment.  How?  By using our Sales Manager Score Grid.  Below is one we developed for a client.  This grid allows a Sales VP to evaluate their Sales Managers quantitatively and a qualitatively through a weighted formula based on your customers and company’s objectives.  Get the Grid, Weighted Formula and Key that will allow you to plot your Sales Managers on the Sales Manager Score Grid and evaluate them both on quota performance and non-quota metrics:

By measuring the Non Quota Metrics vs. the Quota Attainment, you can come to a simple conclusion on whether to invest in the Sales Manager or put them officially on the bubble.
Call to Action:
Involve more than quota attainment when assessing SMs. Use the below bullets to rearrange the way you think about SM performance and potential termination.  Remember, your best SM might be the one who doesn’t consistently make their quota.

• Use both quantitative and qualitative analysis to measure their performance and success to date.

• Choose 5-7 Non-Quota Sales Manager Metrics and weight them in the scoring equation tied to your customers’ needs and company objectives.

• Develop a key on how to measure each metric.  Below is a sample of one metric developed for an individual company’s SM’s:

 

• Determine any circumstances out of their control (i.e.: Failed product launch with the new product quota still assigned, operations nightmare with declining customer service, acquisition or financial default, poor territory design etc.)

• Plot their quota attainment and score on the SM grid.  This will allow you to decide the right actions depending on where they fall on the SM Score Grid.  And if necessary, can help make a quantitative assessment on termination (which might please your HR Leader).

If you need assistance creating your SM Score Grid, leave a comment or send me an email. You can also sign up for our Making the Number Tour where we will come to your business and discuss it with you F2F.  Just don’t make the mistake of firing someone who has tons of potential but missed their quota.

Author: Dan Perry

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