I recently discovered that business gurus taught me wrong.
There is a principle I have blindly believed for a long time: What gets measured gets managed.
Theoretically, this means that you cannot manage something unless it is being measured. If you aren’t tracking or collecting data about parts of your business, then any management being done is based on subjective feelings, experience, hopes, dreams, and, at best, gut instinct.
There is even a fancy business term to let other people know how much you manage by the data: KPI (Key Performance Indicator).
But this principle is wrong. It can actually cause damage within an organization, extra time for management and staff, and misaligned focus of attention and change management efforts.
The reason this approach can be bad is based on the Paradox of Data.
A “paradox” can be defined as a situation, person, or thing that combines contradictory features or qualities.
The question “Which came first, the chicken or the egg?” is a paradox. You cannot have one without the other, so how do you know which was first or most important?
With the Paradox of Data, the “Which comes first?” issue also exists: Do managers first know what is important, so they collect data to manage to? Or do they have data available, so they make those metrics important to the organization?
Even if a new organization or team starts up, management will most likely be seeded by experienced operators who will bring with them the KPIs they have relied on before to make business decisions.
Measuring What’s Important
In that new organization or team, which comes first—the business metrics that are important to the profitability, growth, and success of that organization, or access to data available that then becomes “important”?
I have been a part of many organizations over the years that started out managing the business through Excel spreadsheets. Marketing, leads, clients, fulfilment, and billing were all in spreadsheets that were saved on a server and shared with the required teams, or emailed back and forth with updates.
When you operate in a world of data that lives on spreadsheets, you will make the data you have available important. Mostly because that’s all you really have.
Too Much Information
But I have also been in organizations with a complex CRM, integrations with the VOIP phone system, and many different business-related widgets, all of which are producing a lifetime of data that could be analyzed.
I will admit I have fallen into the trap of chasing down new metrics that might hold the key to business success. Just because I could compile enough statistically significant data, I wanted to make it a new KPI that the sales team was held to.
Sometimes I was right. I did, in fact, find something important that would help provide better visibility into how to get the sales team consistently closing a profitable level of sales each week.
Other times, I found myself falling down the rabbit hole of data. Yes, what I found each time would help the business. But only if we were trying to win the Olympics.
What do I mean by that?
Olympic level swimmers are looking for ways to shave off a fraction of a second from their lap time. Winning the gold, or not even being on the podium, could come down to literally one second. When the victory margins over the world’s best swimmers are that small, the swimmers spend four years between Olympics looking for ways to shave off whatever time they can. I remember when they went from fully shaving their body to save a percentage of drag through the water to wearing full body suits to help glide through the water.
What does this have to do with a sales team?
Most sales organizations are, at best, operating at the level of swimming laps for fun at the local YMCA. If they are lucky, they don’t drown by the time they go down the length of the pool and back.
There are really big KPIs that sales team leadership should be looking at to get big returns on their invested time and effort.
The key is to avoid the trap of making all the metrics available important. Focus on the ones that will move the business needle the most (going after the 20 percent of effort that will get you 80 percent results).
There is always a way to squeeze a few more fractions of a percentage of performance out of the team. But most companies do not need to win the Olympics with their sales team, especially needing that extra fraction of a closing percentage.
Instead of falling into the Paradox of Data, follow these steps:
- Set a profitable goal for your Cost Per Acquisition (CPA)—the total cost of gaining a new paying client. You can do a simple CPA version that is only based on marketing spent to generate a single client, or the more complete CPA that takes into account marketing, sales labor costs, and overhead for that single rep.
- Depending on your sales cycle, determine the key milestones during the sales process (prequalification, quote, contract signed, etc.).
- If applicable, have a benchmark for the percentage of one-call close deals that should occur each day.
- Set the level of acceptable cancellations/refunds for your client base.
- Determine the frequency by which these metrics need to be reviewed by managers, executives, and reps.
- Create a set of rule-based workflows as action steps to take for each given KPI if it falls below the acceptable, preset levels.
- Build a system for reporting on these KPIs in one dashboard so that all required stakeholders can monitor as needed.
And if you are a data analytics nerd like me who loves digging through data haystacks looking for KPI needles, then make sure you are winning with the above process first and getting consistent, scalable, and profitable results from your team.
Once you have that, you can dig in deeper to find those fractions of closing percentage improvements that will take you to a championship level.
If you aren’t sure if your data is driving your management focus, or your management focus is driving your data collection and KPI’s, call or text Jason at (206) 234-1848, or email at firstname.lastname@example.org and let’s set up a discovery call to see what strategies will help.