Unlocking Sales Performance Metrics
Throughout my career, I have collaborated with numerous companies that believed they had a clear understanding of which sales agents were their top performers and which ones were underperforming.
However, I can state that 9 out of 10 were wrong.
They were misled for years due to one simple reason: they measured sales performance incorrectly.
I can also guarantee that 100% of them, after learning the correct way to measure sales performance, they ** have completely changed their approach and have never measured it the same wa**y again.
Moreover, some of them have even modified their bonus compensation based on this new method of calculating sales performance.
But, what were they getting wrong?
Let's see it with a clear example:
The table shows the annual summary of leads handled, sales, and conversion for each sales agent of a B2C company that sell a single type of product.
Faced with these results, I have typically encountered two types of interpretation:
- Those who consider the best agent to be "CL103." This interpretation is based on the absolute number of sales or revenue (360 total sales). And while estimating sales performance by revenue is what intuition first tells us, this way of measuring is biased. The problem is that this agent has managed a larger number of leads. Therefore, having had access to more potential customers and having worked more, he has undoubtedly had more opportunities than the others, and thus, it is normal that he has converted more.
- Those who consider the best agent to be "AG101." This interpretation is based on conversion rate (5.7%). In this case, the previous bias is normalized. Conversion rate compares the agents' ability to generate sales, regardless of the number of leads each agent has received. In other words, it evaluates the transformation of leads into sales, regardless of the initial absolute number of leads, providing a more equitable view of each agent's performance. However, as we see, agent "AG101" has provided less absolute sales. Sometimes, agents with a less volume of leads can focus on converting them and provide better service, but in that case, the owner AG101 has the aproximately the same volume as MJ105 or IG105, and significantly overperforms them.
What if I told you that neither of these criteria is really optimal? Is it possible that they are overlooking something?
The answer is YES. They are overlooking a very relevant factor: the quality of the leads received.
