What’s your approach to sales training? Do you have a process that defines which sales performance competency to train to and what impact it will have on selected performance silos if the training objective is successfully met? Or do you rely on ‘field feedback’ not associated with actual performance numbers and related ROI to decide where to put your training dollars?
Here’s a simple blueprint to gain more revenue in less time while maintaining fiscal accountability to the ‘Top-floor’.
At JDH Group, our go-to-market strategy is to understand a sales organization’s revenue goals and define what key results are needed in performance improvement. To illustrate it, we produce diagnostic performance solution ‘Blueprints’ for sales organizations that utilize the ‘T’ method; both vertical and horizontal.
Horizontally, we look at each KPI and help companies understand how to identify, train to, improve and measure competencies in each of the critical performance indicators.
The ‘T’ method of training evaluation is a process that utilizes both a horizontal approach to key sales performance indicators (KPI) and a vertical examination to calculate the impact, or ‘Return on Training Investment’ (ROTI). Aligning the two will not only give you the path of least resistance to your overall revenue objective but will point to performance silos that will produce more revenue and/or recover unnecessary costs from sub-par sales performance.
Horizontal Examination
Here’s an example of sales organization KPI’s that sells business solutions to small and medium size companies:
• 1st Appointment to Proposal ratio (60%)
• Closing ratio (40%)
• Average Revenue per Sale ($3500)
• Sales cycle (38 Days)
• Revenue goal ($25,000)
• Average New appointments generated per rep (5)
This model represents a sales team that statistically has an opportunity to reach 67% of their revenue goal. So let’s take a closer look at which KPI performance training could achieve the required result the quickest.
One way would be to focus on front-end activity. Improving the average appointment generation to 7 new appointments would achieve the revenue goal, all other factors remaining the same.
Option 1: Establish a Prospecting Methodology; a single, documented and agreed upon prospecting method across all sales regions. The training objective should be to spend less time to gain more ‘Targeted’ business appointments to initiate your current sales process.
Another choice might be to evaluate your current sales methodology to understand if there is any room for improvement in your current closing ratio of 40%. As an example, improving this KPI to 60% would secure the monthly revenue target with no other KPI changes. Or splitting the difference; improving the 1st appointment to proposal ratio by 10% and the closing ratio by 10% would achieve the same result while maintaining the necessary new appointments at (5).
Option 2: Initially, choose a ‘Top-down’ approach versus a bottom up; target and initiate your sales process with a fiscal level of authority. Develop a diagnostic sales process that points to the prospect company’s business objectives parallel to you product/service solution. Speak in terms of Return on Investment, Soft and Hard Dollar recovery and Investment Payback Period. Sell the diagnostic parts to your process in line with the prospect’s annual business objectives; don’t rely on ‘Features & benefits’. Then customize your proposal as a hypothetical case study with measurable results.
Vertical Sales Performance ‘Impact Silo’ Examination
Whether you are initiating sales performance training internally or outsourcing a niche training organization, most folks sitting on the ‘Top-floor’ now require accountability in line with budget expenditures.
Another way to say it is the CFO knows he’s wasting half the sales training budget, he just doesn’t know which half.
Approaching sales training expenditures with a Vertical ‘Silo’ inspection will help score points to the fiscal authorities within your own organization.
Let’s take a look at this same sales organization’s vertical performance silos:
• Average New-hire Ramp-to-Quota (5 months) (35 hires per year)
• Sales employee Turnover due to low appointment activity (30)
• Percent of sales reps at or above Quota (70%)
First, calculate your ‘sub-par’ average revenue. This number reflects the average monthly revenue a new-hire achieves before they achieve quota attainment.
As an example, if your current Average Ramp-to-Quota is 5 months, take the average total Revenue sold in the first 4 months of a new hires routine and divide it by 4. That will give you the average 'Sub-Quota' Revenue per Month during Ramp.
In this example, we will use $8,000 as the average ‘sub-par’ revenue.
One of the overall training objectives could be to improve the New-hire Ramp-to-Quota. So you consider the training result and impact as it relates to revenue recovery by selecting a ramp-to-quota goal that’s more efficient than the ‘status quo’ of 5 months. In this case a 1 month ramp-to-quota reduction would recover $595,000 in additional new sales. That equates to $17,000 per new-hire. And if you have determined that the performance training Cost-per-head is $2500, there’s your internal training ROI; 680%.
And we’re not done yet.
You have defined that 30 sales reps per year go out the door directly related to low activity, not setting enough new business appointments to justify the required revenue result.
Let’s take a closer look at it pertains to related costs and potential recovery. Here are your expense breakdowns relating to a new-hire sales rep:
• Average Salary: $28,000
• Recruiting Costs: $1,200
• Training Costs per Rep: $2500
• Monthly Sales Quota: $25,000
If the focused KPI training initiative reduces your sales rep turnover by 50% (15 reps), that recovers $1,953,500 in measurable dollars, something everyone can actually put their finger on.
That’s over $130,000 of real return for every rep that learns how to effectively set new business appointments.
Considering this cause and circumstance versus the realistic training benefit as a ROI factor, you choose Option 1 to establish a Prospecting Methodology across all sales regions. And in this case, that also justifies the training investment to the “Top-floor’.
In the 3rd Vertical Sales Performance ‘Impact Silo’ we determined that an average of 70% of the sales reps are achieving quota per month. And the average month ‘sub-quota’ revenue achieved for the 30% of reps not reaching quota is found to be $16,000.
We also determined the average new appointments generated per week is (5), but
by improving the 1st appointment to proposal ratio by 10% and the closing ratio by 10% we would achieve Quota consistently.
Next, let’s determine our Return on Training Investment if we meet our training objective of improving the 70% team Quota ‘water-mark’ up to 90%.
• 1st Appointment to Proposal ratio (Improve to 70%)
• Closing ratio (Improve to 50%)
• Average Revenue per Sale ($3500)
• Sales cycle (38 Days)
• Average New appointments generated (5)
• 100 sales reps
Implementing a focused performance improvement system to advance our middle KPI’s in supporting an additional 20 sales reps per month to achieve Quota would increase our monthly revenue results by $180,000.
That’s an annual return of $2,160,000 or a training ROI of 864% based on a $2500 cost-per-head training investment. And with a 38-day sales cycle, the training investment ‘break-even’ point would be approximately 80 days.
Because of this cause and circumstance versus the realistic training benefit as a ROI factor, you choose Option 2 to establish a ‘Business acumen’ sales methodology, develop supporting diagnostic tools to establish financial business metrics parallel to your prospect’s initiatives and your product/service solution.
Adopting this ‘T’ method to sales performance training will allow you to determine the shortest path to your revenue goals, determine and implement ‘Best Practice’ sales performance training and justify the training investment to the “Top-floor’.
Because at the end of the day… it’s all about Return on Investment.
Adopt the ‘T’ Method to Sales Performance Improvement
The Project Management Method – Curse or Blessing
Project management is an area of expertise that has undergone some significant development in the last decade. A business project can have a far-reaching effect on the business and result in either tremendous improvement in the businesses ability to function in the marketplace or a significant setback to that business entity.
The idea of a formalized project management approach has been around for quite some time. So it was not uncommon for any manager to find themselves learning the discipline of a structured project management system. That project methodology takes any given business or IT project through the same standardized steps from conception through implementation. Those steps would include…
* Project definition
* Needs analysis and requirements definition.
* Cost benefit analysis.
* Project scope.
* Project schedule and budget.
* Detailed specifications
* Development
* Testing
* Training
* Deployment
By utilizing a standardized process of doing all projects the same way, using the same reporting methods and tools, there is an economy of skills in that the project leaders and team members become adept at navigating these steps. Further, by using the same systems and criteria, a scale of evaluation as to the effectiveness of the system is developed so the ability of project teams to do well over time improves.
It was natural that this standardized method would become codified and finally developed into a well-developed system that could that molds all projects to a single standard. By developing an industry wide method that requires strict training and adherence to the same terms, tool sets and definitions of success, the “intuitive” nature of judging project effectiveness is reduced. And so “the Project Management Method” was developed whereby project managers can undergo strenuous and exacting training in a standardized method that would be enforced via certification across the whole of the business community.
Whether or not the PMM represents a curse or a blessing to the business world depends to a large extent on individual applications of the method and measurements and observations on whether the method itself introduces efficiency to the process of project management or just another layer of bureaucracy.
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There are some strong positives to utilizing a methodology that is standardized at an industry level. Those project managers who have gone through the certification process can be depended on to implement that system the same way in each business setting. As such, the process of finding qualified project managers becomes simplified because the certification process alone communicates to the business that it can expect the PMM system to be implemented correctly.
By putting into place an external method of certification and measurement of excellence, the project manager career begins to take a high level of professionalism similar to in the legal and medical fields. So the PMM movement represents a maturing of the IT and project management disciplines as they move toward greater levels of accountability and control.
The dangers come in implementation of the PMM methodology on a project by project basis. In order for a PMM certified manager to live by his credentials, all projects must conform to a standard mold. The unique nature of each project may not easily fit into the PMM process of systematization.
In addition, the PMM system is heavily dependent on a large amount of meetings to document that the project is adhering to standards and a methodical documentation process from which there is little room for variation or accommodation. The PMM is a complex methodology so the tool sets that must be used to track the process can be expensive and difficult to use.
The outcome is that the introduction of the PMM system can cause the actual business objectives of the project to take on a secondary priority to the high standards of PMM itself. Project leaders working under the requirements of the PMM can become more accountable to the methodology itself and lose sight of what is good for the business or what is efficient in terms of getting the project completed.
There is very little room for creativity or individual judgment within the confines of the PMM and that is problematic because the nature of business problems have historically depended on the judgment and creative problem solving skills of middle management. By dominating the project process with the needs of the PMM methodology, excessive cost is introduced as well as cumbersome requirements that do not benefit the business or the project itself.