Sales Metrics Should Focus on Measuring Relationships, not Activity
This article originally appeared on DestinationCRM.
Why do we measure?
It’s a question that is deeply meaningful in the field of sales where we have a tendency to track, measure, cut, slice, and extrapolate a wide variety of metrics.
But what is the goal behind all this measurement? The most effective measurement initiatives are those that seek to guide behavior. Taking our cue from famous management theorist Peter Drucker’s comment that “what gets measured gets managed,” the measures we should care most about should be related to the things that we want to improve.
That answer, however, just punts the problem one step further down the road. Now it’s a question of “what should we measure?” What is the metric that is most meaningful to manage to drive improved sales performance?
With any metric, there are a few key features to look out for that differentiate a good metric from a poor one. Given that sales teams are tightly managed by their metrics, these features take on an increased urgency.
First, metrics should not be “gameable.” If I, as a salesperson, can do a set of things that hit all the metrics but don’t accomplish what the spirit of the metric was meant to measure, then I’m “gaming” those metrics.
Second, the metrics need to be relevant. They need to be strongly correlated with the ultimate goal of acquiring new revenue and gaining customers.
Third, the metrics should be a leading indicator of success. If you are trying to manage revenue, then you want the metrics you are managing to be ones that you can measure well in advance of the deals closing. If you want to measure the performance of each of your sales reps, you want those measurements to be available quickly, rather than having to wait for a few quarters to see if they can close deals.
A metric that meets those three criteria is a metric that can be used effectively to manage sales.
Today, in sales organizations everywhere, metrics of raw activity are being used to manage sales teams. This measurement of “activity”—i.e., emails sent and voicemails left—means that those sales teams work toward sending more emails and leaving more voicemails.
In today’s era of automation, however, these have become progressively worse metrics to use. With a single click, a business development rep can automate the sending of hundreds, or even thousands, of undifferentiated, automated outreach emails. At the same time, the negative impact of these emails on the executives who receive them by the hundreds each day should be a clear indicator that the number of emails sent does not correlate with success in a positive way.
Measuring and managing sales teams on their activity has led to increasingly bad behaviors and substantially worse outcomes over the last few years. Clearly these are not the measurements to rely on. But what can replace them that gives us a leading, non-gameable, relevant indicator of success?
At Nudge.ai, we’ve worked with tens of thousands of sales professionals, across all industries and sizes of companies, to understand the answer to that exact question. The core answer, unsurprisingly, is a measurement of the quality and strength of relationships. The importance of relationship building has been known, intuitively, to sales managers for decades. However, relationships have always remained amorphous and unmeasurable.
Now, relationship intelligence software makes it possible to measure relationships accurately and quickly across an entire organization. In real time, it can show where sales reps have relationships of what strength at which accounts. For the first time, this gives sales management the ability to measure and manage a metric that is a highly accurate, leading indicator of success that can’t be gamed.
Measuring relationship strength does start with raw back-and-forth activity. However, the nuances of what comprises a strong relationship make it a much more challenging metric to measure. Relationships decay over time, but older, stronger relationships decay much more slowly. Relationships grow with interactions, but they grow much more with one-on-one interactions than one-to-many interactions. The more interactions, the stronger the relationship, but only if they are “balanced” between the participants (equal numbers of messages in each direction). Relationships are with people, but people change jobs and interact across multiple identities—the best salespeople know to maintain these relationships across multiple jobs, as those are often the strongest..
It has been impossible to tease out relationship nuances from the raw activity tracking in CRM systems, social media management, or other analytics tools. But the advent of artificial intelligence, and the tooling that AI makes available under the hood, allows a clean measurement of relationship strength with each nuance carefully taken into account. These nuances also make measurements of relationship strength difficult to game.
With the ability to measure the strength and quality of relationships, the way sales teams are managed can change dramatically. It is easy to analyze historical deals and get a clear sense of what depth and breadth of relationships is needed to get an enterprise deal done. Across a wide variety of Nudge customers, we’ve often seen that five to eight strong relationships are needed for most enterprise deals. These can be relationships with the business stakeholders, users, finance, operations, and IT, depending on the nature of the deal cycle.
To help sales teams create and maintain these relationships and deal pipelines, they can be analyzed with respect to which deals are missing those relationships. Rather than using automation to send increasingly more undifferentiated outreach, modern sales teams are using artificial intelligence to do deeper research on buyers and identify opportunities to begin or build relationships. Rather than launching emails at every contact at an account, modern sales teams can now understand where existing relationships exist—with colleagues, investors, or advisors—and turn them into a warm introduction.
We measure so that we can manage. However, in thinking carefully about what we want to manage, we need to understand what a discipline is at its core. Sales is a discipline that is all about building trust, and empathy. If we are measuring raw activity, we will get spam. If we are measuring relationships, we will get trust and empathy. It’s better to build a sales organization around relationships, the most human of metrics.
Steve Woods is cofounder and chief technology officer of Nudge.ai, a relationship intelligence platform that helps businesses find and grow the right relationships that drive sales. Prior to that, Woods served as cofounder and chief technology officer of Eloqua, a company he helped guide to a market leading position in marketing automation.