Sales leaders and sales managers spend time looking at their sales team's performance. What they learn by managing performance helps illuminate what they need to change and what their salespeople need to improve sales performance. But how does one measure a sales manager’s performance? Different companies use different metrics, but the eight that follow provide a balanced approach to measuring sales manager performance.
The sales manager should expect to be measured on their quota attainment. Whenever a salesperson is promoted to sales manager, the first thing they need to understand is that their quota is determined by totaling the quotas of all the salespeople on their team. Quota attainment is a good way to assess a manager’s performance because they can only reach their quota if their team members hit their individual targets. The higher the percentage, the better the manager’s performance.
All metrics need to include context. A new sales manager may have to rebuild a sales team, work to recover neglected territories, or replace their top two salespeople. In such cases, it can take time before everyone hits quota.
Sales Force Win Rates
Another metric worth measuring, and my all-time favorite, is the sales force's win rate. Despite being the most important outcome, too many sales leaders and sales managers overlook the win rate. Instead of working to increase their team’s win rate, weak managers turn winning into a numbers game, requiring more and more opportunities. In reality, the team’s win rate is low because they lose far too many deals.
While it is true that some salespeople are gifted with attributes that make selling easy, every salesperson has the potential to improve with training, sales coaching, and a development plan to speed their growth. The sales team with the ability to win a high percentage of its opportunities is a tremendous strategic advantage.
Everyone on the sales manager's team is progressing, regressing, or stagnating. Because the sales manager is responsible for the individuals on their teams, they need to forbid salespeople from becoming comfortable. When salespeople get comfortable, they stop growing, which leads to stagnation. Managers must also stop any salespeople who are on a backward slide. Sales success is individual.
One way to measure a sales manager's performance is to measure the growth in their sales team's win rates. A salesperson who started the year with a 20 percent win rate and ends it with a 42 percent win rate has grown and improved. The average growth rate of the team is another way to evaluate the sales manager's results.
Net New Revenue
Quota attainment covers revenue attainment. Another view of revenue, especially for growth-oriented companies, is net new revenue. Net new revenue, whether it comes from cross-selling to existing clients or through acquiring new clients, is proof the sales manager is doing well.
The sales manager who can lead their team to create and win the new opportunities that result in net new revenue is almost always certain to score higher than the sales manager that allows their sales team to avoid prospecting and opportunity creation. This second type of sales manager is often responsible for declining revenue.
New Client Acquisitions
The raw count of newly acquired clients is worth measuring. Because every company experiences some amount of churn, it's important to continually acquire new clients to replace those that are lost and to provide for growth.
A sales team that prospects and wins new deals says much about the sales manager's leadership.
I grew up in an industry with small margins so, as a sales leader, I prioritized profitability over revenue. I rejected any client that would not generate the appropriate profitability. I watched competitors lower their prices to win large clients. The faster they grew their revenue, the sooner they closed.
Revenue by itself doesn't tell the whole story. The sales manager's profitability is evidence of their performance. Anyone can run up their revenue numbers by lowering their price or making enough concessions that the client signs a contract. There is no reason to take unprofitable business or waste your company's time and effort on clients that contribute too little for the cost.
You might launch a new product or service, cross-selling something that will improve your client's results, or improving your margins. You might also open a new territory. These company initiatives are important, and sales managers and their sales teams are responsible for pursuing them.
Anything that is going to be measured will be evaluated. The sales manager's performance will include an evaluation and a measurement of their team's contribution to any company goal. These initiatives can cause whiplash, as new priorities often require building a new pipeline after having already built one based on other priorities. We underestimate how difficult it is to shift gears.
It's not unusual for human resources to query the company to take a measurement of employee engagement, including among the sales team. When a sales force scores their manager with high grades, you can be almost certain engagement is high. A low score is evidence the sales manager isn't providing enough leadership, time, and attention.
Before you blame the sales manager for low engagement, it's important to remember they are continually asked to deal with internal issues that reduce the time they have for their teams. However, engagement is critical and will lead to better scores on the other metrics used to evaluate a sales manager's performance.
Sales manager performance can be measured in a variety of ways. By using this set of metrics, sales leaders can gain insight into the effectiveness of their sales managers, who can use the data to improve sales results.