THE SALES ORGANIZATION PERFORMANCE GAPpages.velocify.com/rs/...Performance-Gap-2015.pdfThe Sales...

1The Sales Organization Performance Gap

THE SALES ORGANIZATIONPERFORMANCE GAPThe Key Attributes and Metrics That Separate High-Performing Sales Organizations

From Average and Underperforming Sales Organizations

Written & Researched by

Steve W. MartinSales Expert, HBR Contributor, and Author of the Heavy Hitter Sales Series

Nick HedgesPresident and CEO of Velocify


Steve W. Martin is an expert on the human nature of complex sales. His “Heavy Hitter” series of books for senior salespeople has helped over 100,000 salespeople become top revenue producers. His new book is titled Heavy Hitter I.T. Sales Strategy: Competitive Insights from Interviews with 1,000+ Key Information Technology Decision Makers and Top Technology Salespeople. Steve is a regular contributor to the Harvard Business Review and teaches at the University of Southern California Marshall School of Business MBA Program. You can learn more about Steve at www.stevewmartin.com.

About Steve W. Martin

About the Authors

Nick Hedges is the president and CEO of Velocify and a 15 year veteran of the Internet and software as a service (SaaS) industry. Nick has spent the last seven years at Velocify helping organizations accelerate sales performance and is a widely-recognized thought leader with respect to technology’s transforming impact on the sales profession. Nick is also a regular contributor to Inc.com, where he writes a column called Sales Acceleration. For more on Nick, visit http://velocify.com/company/leadership/

About Nick Hedges

http://www.stevewmartin.com/

http://velocify.com/company/leadership/


The answer to this question is exactly what Steve W. Martin, well-known sales author and sales organization researcher, set out to find. To do so, Martin conducted extensive surveys with top-level sales leaders, mid-level sales managers, and salespeople. The resulting research, The Sales Organization Performance Gap, provides detailed insights on the characteristics of high-performing sales organizations, quota analysis measurements, and key sales performance metrics.

Nearly 800 sales professionals participated in the study by completing an extensive 42-question survey. The survey goal was to gather both qualitative information about the attributes of high-growth sales organizations

and the associated quantifiable performance metrics. Participants were asked to share their opinions on their sales organization, their top sales challenges, and personal details about their own quota performance. In exchange for their candor, it was agreed that their names and organizations would remain anonymous.

Twenty-two percent of survey participants included top-level sales leaders such as vice presidents of sales, 14 percent were front-line sales managers who manage salespeople, 17 percent were hybrid sales managers who sell directly to customers and manage other salespeople, and 47 percent were salespeople who carry their own quota.

What Separates High-Performing Sales Organizations From Average and Underperforming Sales Organizations?

Study Participants by Role

Quota-CarryingSalespeople47%

Top-LevelSales Leaders22%

Front-LineSales Leaders14%

HybridSales Leaders17%



Study participants were asked to compare year-over-year revenue growth for the past two years and indicate whether annual revenues increased significantly, increased slightly, remained about the same, or declined. Responses were grouped together and the survey results were analyzed by company name, annual revenue, number of employees, and industry type to

ensure data accuracy. Approximately 30 percent of participants indicated they had a high level of revenue growth, 44 percent had minimal revenue growth, 17 percent had flat revenues, and 9 percent had declining revenues. The figure below shows the distribution of responses among high-performing, average-performing, and underperforming sales organizations.

Sales Organization Performance Curve

17%

44%

30%

Declining Revenues

Flat Revenues

Minimal Revenue Growth

High Revenue Growth

9%

Underperforming Organizations

Average Organizations

High-PerformingOrganizations



The study results reveal significant differences between how high, average, and underperforming sales organizations set goals, perceive themselves, and structure their organizations. Below are 15 key attributes and performance-related metrics that reveal the gap

that exists between high-performing sales organizations and average and underperforming sales organizations. Each of these factors help define and demonstrate optimum sales organization performance.

1. High-performing sales organizations set higher quotas and believe in lower quota attainment than average and underperforming sales organizations.

2. Sales managers at high-performing sales organizations have higher quota risk pool factors, where the sum of all the quotas of their salespeople is significantly higher than the personal quota for which they are responsible.

3. High-performing sales organizations are not afraid to aggressively raise year-over-year annual quotas.

4. High-performing sales organizations attract top sales talent through better compensation.

5. Sales managers at high-performing sales organizations indicated their teams have a higher percentage of top performers and a lower percentage of bottom performers than sales managers at average and underperforming sales organizations.

6. Sales managers at high-performing sales organizations rate the teams they manage more highly.

7. Salespeople and sales leaders of high-performing sales organizations rate the quality of their sales organizations more highly.

8. High-performing sales organizations describe their sales culture differently than average and underperforming sales organizations.

9. Members of high-performing sales organizations have a different perspective on the factors that separate great from good sales organizations.

10. High-performing sales organizations have a higher level of morale.

11. High-performing sales organizations hold their team members to a higher level of accountability.

12. High-performing sales organizations are quicker to terminate underperforming salespeople.

13. Sales managers at high-performing sales organizations reported a higher percentage of their salespeople achieved their annual quotas.

14. High-performing sales organizations employ a more structured sales process.

15. High-performing sales organizations more closely monitor their lead follow-up process.

Goal–Setting | Set high quotas and compensate for achievement

Attitude | Team mentality and confidence in the company and the team’s capabilities

Structure | Expectations are followed up on and processes are put in place


Goal-Setting: Set high quotas and compensate for achievement

Forty-six percent of members of high-performing sales organizations indicated that less than 60 percent of salespeople should make quota, compared to 30 percent of members of both average and underperforming sales organizations. In other words, quota attainment should not be easily achieved and

quotas are expected to be aggressively set. Conversely, 52 percent of responses from underperforming sales organizations and 50 percent from average sales organizations indicated that more than 70 percent of salespeople should achieve quota.

High-performing sales organizations set higher quotas and believe in lower quota attainment than average and underperforming sales organizations.

What is the optimum percentage of salespeople who should make quota to validate that quotas are not set too high or too low?

Less than 60% of salespeople should make quota

61% to 70% of salespeople should make quota

71% to 80% of salespeople should make quota

More than 81% of salespeople should make quota

0% 10% 20%

Percentage of responses

30% 40% 50%

High-Performing Organizations



1



A sales manager’s quota risk pool factor is calculated by adding all the quotas of the salespeople who report to him/her together and dividing the sum by his/her quota. For example, if a sales manager’s quota is $10 million and he has 10 salespeople who each have $1 million quota, his quota risk pool factor would be one. Forty-four percent of sales managers at high-performing

companies have a quota risk pool factor greater than 1.25, compared to 26 percent for average and 27 percent for underperforming companies. Fourteen percent of high-performing sales organization managers have a quota risk pool factor greater than 1.75 compared to 3 percent at underperforming sales organizations.

Sales managers at high-performing sales organizations have higher quota risk pool factors, where the sum of all the quotas of their salespeople is higher than the personal quota for which they are responsible.

When added up, the total quota for all the salespeople who report to me is:

Roughly equal to the sales quota I carry

10% to 25% above the sales quota I carry



More than 75% above the sales quota I carry

0% 10% 20%


30% 40% 50% 60%




2



Seventy-five percent of high-performing sales organizations raised 2014 annual quotas more than 10 percent over 2013 quotas compared to 25 percent for average and 17 percent for underperforming sales organizations. Annual quotas remained the same

or decreased for 65 percent of underperforming sales organizations, 48 percent of average sales organizations, and only 14 percent of high-performing sales organizations.

High-performing sales organizations are not afraid to aggressively raise year-over-year annual quotas.

Approximately by what percentage did your sales quota increase from 2013 to 2014

Decreased

Remained about the same

5% to 10% Higher

11% to 25% Higher

26% to 50% Higher

More than50% Higher

0% 5% 10%


15% 20% 25% 30% 35% 40% 45% 50%




3



Ninety-one percent of sales team members of high-performing sales organizations indicated that their compensation was at or above the average of the industry. Conversely, only 9 percent of high-performing companies paid below market average compared to 29 percent of underperforming organizations. One surprising metric is that 35 percent of both high-

performing and underperforming sales organizations compensate above market average. However, based upon the previous three points about performance and the talent quality of sales organizations, it can be interpreted that underperforming companies are actually overpaying to retain subpar talent, while high-performing companies will pay more to attract top sales talent.

High-performing sales organizations attract top sales talent through better compensation.

How does your compensation compare to other companies within your industry?

Above Market Average

Market Average

Below Market Average

0%


20% 60%40% 80%




4


Attitude: Team mentality and confidence in the company and the team’s capabilities

Sales managers at high-performing sales organizations indicated their teams are composed of 45 percent top performers, whereas top performers make up 29 percent of the team for underperforming sales

managers. Only 14 percent of the team was identified as below-average performers by high-performing sales managers as compared to 24 percent for the managers at average and underperforming sales organizations.

Sales managers at high-performing sales organizations indicated their teams have a higher percentage of top performers and a lower percentage of bottom performers than sales managers at average and underperforming sales organizations.

Categorize the salespeople on your team by performance

Percentage that are top performers

Percentage that are average performers

Percentage that are below-average performers

0%


10% 50%30% 40%20% 60%




5



Sales managers at high-performing companies were three times more likely to rate the team they manage as excellent compared to managers at average and underperforming sales organizations. Seventy-six percent of high-performing team sales managers rated their team as excellent or above average compared

to 57 percent at average sales organizations and 51 percent at underperforming sales organizations. Forty-nine percent of sales managers at underperforming organizations rated their team as average or below average compared to 24 percent of sales managers at high-performing sales organizations.

Sales managers at high-performing sales organizations rate the teams they manage more highly.

How would you rate the sales team you manage?

Excellent

Above average

Average

Below average

0%


10% 50%30% 40%20% 60%




6



Twice as many salespeople and sales leaders at high-performing sales organizations rated their organization as excellent as compared to respondents at average and underperforming organizations. In addition, 78 percent of high-performing team members rated their organization as excellent or above average

compared to 51 percent of average and 49 percent of underperforming team members. Only 1 percent of high-performing team members rated their sales organization as below average compared to 10 percent of average and 8 percent of underperforming team members.

Salespeople and sales leaders of high-performing sales organizations rate the quality of their sales organizations more highly.

How would you rate your sales organization?

Excellent

Above average

Average

Below average

0%


10% 50%30% 40%20% 60%




7



Survey participants were asked to select from three different descriptions that best describe their sales organization. Were they part of “a cohesive group of like-minded individuals,” “a team of seasoned professionals,” or “a loose collection of individuals”? Thirty-eight percent of high-performing team members selected “a cohesive group of individuals” compared to 21 percent of average and 23 percent of underperforming team members. Forty-three percent of average team

members selected “a team of seasoned professionals” compared to 36 percent of high-performing responses. Only 26 percent of high-performing team members selected “a loose collection of individuals” compared to 37 percent of underperforming and 36 percent of average team members. The results suggest that the optimal sales culture is one where the sales team members are engaged, connected, and collaborating as part of a team.

High-performing sales organizations describe their sales culture differently than average and underperforming sales organizations.

What best describes your sales organization?

A cohesive group of like-minded individuals

A team of seasoned professionals

A loose collectionof individuals

0% 10% 20%


30% 40% 50%




8



Study participants were asked to rate seven different factors as to their importance in determining whether a sales organization is good or great. In general, high-performing sales team members placed action-oriented factors at the top of their list, including lead generation and pipeline activity and disciplined sales process and systems usage. Underperforming sales team participants placed more personal, skills-based

factors at the top of their list, including sales team morale and collaboration, talent of salespeople, and quality of sales leadership. One interpretation of these results suggests that high-performing sales teams think in terms of strategic sales process management, while underperforming sales teams are more focused on personal sales prowess.

Members of high-performing sales organizations have a different perspective on the factors that separate great from good sales organizations.

Prioritized factors separating great from good sales organizations

Lead Generation &Pipeline Activity

Disciplined SalesProcess & Systems Usage

Sales Team Morale& Collaboration

Quality of Sales Leadership

Talent of Salespeople

Training and Field Support

Integration with Marketing, Finance, Services




High-PerformingOrganizations

AverageOrganizations

UnderperformingOrganizations





Most Important

Least Important








9



Fifty-six percent of high-performing team members indicated that their sales organization’s morale was higher than most sales organizations’ compared to only 11 percent of average and 21 percent of underperforming sales team members. Conversely,

35 percent of underperforming sales team members and 27 percent of average team members indicated that their sales organization’s morale was lower than most organizations’, while only 4 percent of high-performing organizations responded similarly.

High-performing sales organizations have a higher level of morale than average and underperforming sales organizations.

How would you rate the morale across your entire sales organization?

Higher than most sales organizations

About the same as most sales organizations

Lower than most sales organizations

0%


20% 60%40% 80%




10


Structure: Expectations are followed up on and processes are put in place

Study participants were asked whether or not they agree with the statement that their salespeople are consistently measured against their quotas and held accountable for their results. Twenty-nine percent

of high-performing sales team members strongly agreed with that statement, while only 13 percent of underperforming sales team members did.

High-performing sales organizations hold their team members to a higher level of accountability.

At your organization, salespeople are consistently measured against their quota and held accountable

Strongly agree

Agree

Neither agreenor disagree

0% 10% 20%


30% 40% 50%

Disagree

Strongly disagree High-Performing Organizations



11



Eighteen percent of high-performing sales organizations indicated that salespeople will be terminated for poor performance after one quarter compared to only 2 percent of average and 5 percent of underperforming organizations. Seventy-eight percent of high-performing sales organizations indicated that a poor performer will be terminated within a year compared to 63 percent

of average and 52 percent of underperforming sales organizations. Nine or more quarters are required to terminate an underperforming salesperson according to 12 percent of underperforming and 8 percent of average sales organizations while no high-performing sales organizations indicated it should take that long.

High-performing sales organizations are quicker to terminate underperforming salespeople.

A salesperson will be terminated at your company for poor performance after:

One quarter

0% 5% 10%


15% 20% 30%25% 35%

Two quarters

Three to fourquarters

Five to eightquarters

Nine or morequarters

Prefer notto answer




12


Sales managers at high-performing sales organizations reported that 60 percent of their salespeople achieved their annual quotas as opposed to 49 percent of the

salespeople at average sales organizations and 56 percent of salespeople at underperforming sales organizations.

Sales managers at high-performing sales organizations reported a higher percentage of their salespeople achieved their annual quotas.

What percentage of the salespeople who report to you made quota in 2013?




0%

Average of responses

20% 60%40% 80%

60%

49%

56%


13


Fifty percent of study participants from high-performing sales organizations responded they had sales processes that were closely monitored, strictly enforced or automated compared to just 28 percent from underperforming sales organizations. Forty-eight

percent of the participants from underperforming sales organizations indicated they had nonexistent or informal structured sales processes compared to only 29 percent from high-performing sales organizations.

High-performing sales organizations employ a more structured sales process.

How structured is your company's sales process?

Nonexistent

Informal

Well-documented(written)

Closely Monitored

Strictly enforcedor Automated

0% 5% 10%


15% 20% 25% 30% 35% 40% 45%





14


More high-performing study participants indicated their lead process was well-documented, closely monitored, strictly enforced, and automated compared to their counterparts from average and underperforming organizations. In fact, the study found that average and underperforming organizations most often have an informal process for lead follow-up while high-

performing organizations most often have lead follow-up processes that are monitored and enforced. For example, 47 percent of high-performing sales organization study participants indicated their lead follow-up process was closely monitored and enforced compared to 32 percent of average and 36 percent of underperforming sales organizations.

High-performing sales organizations more closely monitor their lead follow-up process.

How structured is your company’s lead follow-up process?

Nonexistent

Informal

Well-documented(written)

Closely Monitored

Strictly enforcedor Automated

0% 5% 10%


15% 20% 25% 30% 35% 40%





15


Velocify is a market-leading provider of cloud-based intelligent sales software, designed for high-velocity sales environments. Velocify helps sales teams keep pace with the speed of opportunity and increase revenue by driving rapid lead response, increased selling discipline, improved productivity, and actionable selling insights. The company has helped more than 1,500 companies across a variety of industries improve customer acquisition practices and sales performance. Velocify was recently recognized as one of the fastest growing companies in North America by Deloitte and a Best Place to Work by the Los Angeles Business Journal. For more information, please visit velocify.com or follow the company on Twitter @Velocify.

About Velocify

The results from this study quantify what many sales leaders have intuitively known for years. The best sales organizations have strong leaders who exercise control, monitor team performance, and establish internal processes by which all team members must abide. They employ a “Darwinian” sales culture strategy, where they hire talent of such high quality that it actually “challenges” the more tenured sales team members to perform at the highest level. In addition, weaker sales team members who cannot contribute their revenue share are quickly let go.

The best sales organizations are not a collection of individuals trying to succeed as a team. Rather, they have a high level of morale and camaraderie. They are united for a greater purpose than themselves. While the company’s goal may be to go public or reach certain revenue milestones, the greatest sales organizations are on a never-ending mission to excel, succeed, and prove to the world they are the best.

Final Thoughts

http://velocify.com/

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