We are living in a time of information overload. With no shortage of internal and external data, sales executives need to carefully choose the data and information they use to make sales management decisions and determine strategy. Otherwise, they risk getting overwhelmed with too many data points that could hinder a focus on what is truly important to success.
As every sales executive knows, a strong and effective sales force is a constant work in progress that must be carefully managed and monitored. Therefore, the data required to manage the sales force is likely to evolve with business needs and priorities. Moreover, the exact array of data that will be most helpful to sales executives is likely to vary depending on the situation and from business to business and from sales organization to sales organization.
Therefore, choosing data to track and analyze is not a one-time occurrence but something that, like the sales force itself, requires careful management. In general, this data will fall into two categories: (1) internal data gathered from new or existing data systems and (2) external data, including industry trends and economic data and statistics.
Finding the Right Data
When it comes to finding the right data with which to benchmark sales organization performance, there is plenty to be had. Some of it is free but more of it comes with a cost. For the purposes of this article, we will focus on free data and how sales executives can leverage that data in various ways.
Data derived from recruiting sales talent can be very useful and in some cases can not only shed light on recruiting problems but point to the root of bigger sales problems. For example, a report in the Wall Street Journal stating that, “Employers spent an average of 41 days trying to fill technical sales jobs, compared with an average of 33 days for all jobs,” can lead to a broader discussion of rebuilding so-called middle skills necessary for success in various jobs, including sales positions. For example, a recent report from Harvard Business School suggests that employers transfer supply chain concepts to finding talent:
- Forecast, Planning, and Inventory Management involves identifying the skill and talent most important to strategic success, identifying potential skills gaps and planning for workforce needs.
- Source and Procure requires cultivating a strong supply base for this talent.
- Supplier Relationship Management means partnering with technical and community colleges to develop needed talent.
- Make and Deliver focuses on the need for employers to invest in talent development instead of expecting talent to be developed elsewhere.
In other areas, specific data is not as meaningful and, instead, can provide what are essentially guidelines or ideas for managing different parts of the recruiting process. For example, when it comes to the right number of candidates to interview for a sales position, that number is often based on the hiring manager’s preference, talent pool, and design of the screening process. Some managers prefer to interview several candidates for a position to get a sense of who is available and what skills, talents and experience they bring to the table. Even if a strong candidate is not a good fit for a current sales role, there may be other available roles that are a good fit or the manager might want to keep that candidate in mind for future needs. However, other managers who are focused on making the hiring process as time and cost efficient as possible rely on a structured and rigorous screening processes that leverages email, and telephone interviews, in addition to third party psychometric assessments, to identify only the top three or four strongest candidates for deep, face-to-face interviews.
DePaul University’s Sales Leadership Center offers some basic benchmarking data on the recruiting process that can be useful for sales leaders. While some of this data is time sensitive and should be considered from that standpoint, much of the recruiting-related data is relatively timeless. For example, when gauging an appropriate number of interviews for new talent, the DePaul data found little change in company habits from earlier surveys. Three interviews (39 percent of companies) appears to be the “sweet spot” of not too much and not too little interaction with candidates. However, a significant number of companies limit interviews to two per hire (28 percent) or four interviews (16 percent). Our experience over the years tells us that three interviews, consisting of stakeholders from a variety of business units (marketing, HR, sales, and members of the C-suite) works best to mitigate hiring risk by reducing bias and eliminating the irrational gut instinct that often grips hiring managers.
The survey goes on to highlight the amount of time companies spend with candidates before extending an offer. Two to three hours is the most common amount of time (43 percent of companies), followed by four to five hours (26 percent). Interestingly, a significant number of companies (14 percent) spend less than an hour with candidates before hiring, while 12 percent spend six to seven hours with them and 5 percent spend more than eight hours with candidates.
Since sales people are expert interviewers, the time invested by hiring managers during the interview process should not be underestimated. With four out of ten reps missing sales targets every year, the necessity to make the right sales hire through a rigorous interview process that seeks proof of success in similar sales environments is what sets apart world-class hiring organizations from the rest. [Click here to view the ultimate list of sales interviewing questions]
The DePaul University data also offers a good sanity check for sales managers concerned about particular problems with the performance of individual sales reps and the sales force as a whole. For example, a sales manager who wants to compare the percentage of sales reps who reach their quotas in a given year will find that the 600 companies surveyed said that 38 percent of their sales representatives were at quota, 33 percent above quota and 29 percent below quota. Other data includes percentage of sales as new business, profit/sales ratios by industry, and sales and profit per employee by industry.
Broad-based surveys like this have their drawbacks. Sales organizations in different companies and industries vary greatly. A 2013 sales survey published in the Harvard Business Review found significant differences in quota attainment by industry. Just over half of sales reps in software companies (52 percent) reached their quotas, while reps in computer hardware (60 percent), cloud/software-as-a-service (61 percent) and telecommunications (66 percent) companies performed much better.
Looking at sales data also provides some insight into which sales metrics companies tend to track. For example, the HBR survey focuses on and provides benchmarking data for what it considers the 12 most important sales metrics:
- percent of organization achieving quota
- quota attainment average
- average annual quota for field salesperson
- average annual quota for inside salesperson
- average annual on target earnings
- average new deal size
- sales cycle length
- vertical sales adoption
- percentage of sales reps selling to small and medium-size businesses
- field sales revenue
- management of inside sales roles
- sales preparedness
Other surveys and some sales gurus advocate for focusing on a smaller number of metrics, such as open and closed opportunities per rep and win rate or lead flow, qualified opportunities, conversion rate and booked revenue. In other words, data alone doesn’t tell the story. What is being tracked and focused on is often just as helpful.
Free basic sales compensation data is relatively easy to come by. However, the quality and utility of that data varies considerably.
Government sources. Perhaps the most useful free source of sales compensation data for companies with U.S. operations is the U.S. Bureau of Labor Statistics (BLS) Occupational Employment Statistics series. This survey provides a wealth of free and comprehensive pay data broken down into several categories:
- national (U.S.)
- metropolitan area
- ownership type
Sales executives can leverage these categories to create various subsets of data to meet their needs. While the job categories may be broader than most companies use, this data can be a good starting point for benchmarking pay levels. It is important to note, however, that BLS data is not broken out by type of compensation—i.e., how much of total pay is made up of base salary and incentives.
Online salary sites. While compensation data from free online services, like Salary.com, can be useful in some ways, sales executives should approach this data with extreme care. The key drawback of using this data is that it may be out of date and its accuracy cannot be verified. Much of the data is self reported, meaning that individuals provide the information on their own job position and compensation. Therefore, sales executives who want to use this type of compensation data should not rely on it alone. However, they can use it to supplement any other verified compensation data sources they are using.
Association surveys. Industry and professional associations are good sources of compensation data. Not only are these surveys targeted to specific professions or industries, these groups may also provide free or discounted survey reports to organizations that participate and provide data for these surveys. WorldatWork, a compensation trade association, provides a high-level report on its annual pay survey. The free data covers only four categories of workers—non management/non union hourly, non management salaried, management salaried, and officers/executives. However, the survey includes data from more than 5,500 organizations and it provides basic salary increase data from 19 countries.
Consulting firms. Various compensation consulting firms usually provide high-level results from their annual compensation surveys. This data , however, may not broken out by type of position (instead, it might use broad categories like pay for hourly employees, salaried positions and executives).
In some cases, these survey reports offer some sales-specific data. For example, Mercer’s 2014/2015 Compensation Planning Survey identified sales professionals as one of the positions for which it is most difficult to attract and retain talent. Another data nugget is the fact that both public and private companies offer target incentives for sales professionals equal to 20 percent of base salary. It is important to keep in mind the broad-based nature of these surveys. For example, our own data suggests that senior B2B reps compensation packages, regardless of industry, provide an even 50/50 split between base salary and commission incentives. The breakdown of these incentives in the Mercer survey is heavily weighted toward individual performance (about 50 percent), followed by organization, division and department metrics, which align with our internal data sets.
Consulting firms that specialize in sales compensation also provide high-level survey results that are obviously going to be more focused on sales. For example, The Alexander Group provides high-level reports on various aspects of sales compensation (registration required), including revenue growth expectations (average of 12.8 percent), incentive budgets (average of 4.9 percent) and base pay increases (average of 3.2 percent). Other firms offer industry specific survey reports, such as this one from ZS Associates and Reality Works on the high tech industry.
Industry and economic trends
Industry and macroeconomic data are also important elements of sales management. The obvious use of external data is to keep up with customers and the challenges they face, not to mention understanding how those challenges can impact customer budgets and purchasing behavior. However, industry and economic data also have important implications for companies recruiting sales talent.
The most logical use of economic indicators involves gauging the economic issues facing the sales force in different parts of the country and the world, which could significantly affect a company’s ability to acquire new customers and sell more products and services. From a recruiting standpoint, this data allows sales executives to present a stronger case for increasing sales force headcount, as well as obtaining additional resources or anything else for the sales organization, by showing how that spending will drive more revenue.
This is especially important when working with peers in finance, operations, marketing and even the CEO. By showing what this data and information mean to the business from a sales perspective, sales executives can demonstrate an understanding of the company’s and its industry’s business cycle and the underlying economics driving company performance.
Employment data on the local, state/regional and national levels can be useful when making hiring plans. If the company routinely looks nationally or internationally for talent, the data they track would naturally expand accordingly. The U.S. Department of Labor maintains a web page with a list of employment-related data sources. The BLS also has a comprehensive list of available data, tables and calculators by subject. The Conference Board is another source of broad employment-related data. For companies with operations in Europe, the European Commission maintains several data sources. Our sales hiring landscape series also provides employers a detailed overview of key markets such as Chicago and Boston.
Finally, sales executives might also want to track specific industries, including their own, to see how economic developments might help or hurt the company’s ability to hire sales professionals from companies in those industries. For example, if sales professionals from a particular industry are often a good fit for the company’s sales force, tracking the performance of those industries is critical. This way, if a certain industry is heading toward a slump, the company might have a better chance of recruiting some of the key sales talent from those companies. News about mergers and acquisitions in industries from which the company recruits sales talent is also useful. After all, these transactions create uncertainty and often make sales talent more open to new opportunities.
These free data sources are just the tip of the iceberg for sales executives. It is possible to track data and create metrics on just about anything these days. However, more data is not necessary better.
When looking for and tracking data, the key is to make sure that data is crucial to business and sales success. Otherwise, these efforts can become more of a confusing burden than an aid to better sales decision making.
Eliot received his B. Comm. from Carleton University and has been honored as a Top 40 Under 40 Award winner.
He co-authored Sales Recruiting 2.0, How to Find Top Performing Sales People, Fast and provides regular insights on sales team management and hiring on the Peak Sales Recruiting Blog.
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