In my “Relative Engagement Effect” blogs, Part 1 and Part 2, I explained the impact that sales seasonality has on new hire development and ultimately their individual revenue performance. In those articles I challenged my readers to conduct an analysis based on “Hire Month”.
An analytics-based strategy for optimizing new seller revenue
“Your goal shouldn’t be to buy players, your goal should be to buy wins. And in order to buy wins, you need to buy runs… When I see Johnny Damon, what I see is… an imperfect understanding of where runs come from… Baseball thinking is medieval. They are asking all the wrong questions.” (Peter Brand from the movie Moneyball)
What if I told you that both sales leaders and sales enablement teams are also thinking “medievally” when it comes to managing (and assessing) the financial impact of onboarding new salespeople. In fact, what if I told you that this lack of atrue understanding is causing companies to invest too little time and the wrong kind of focus on developing their sales talent. And, as a result, they arecontinuously degrading their company’s overall revenue performance.
Let’s start with the current paradigm: there are a handful of metrics which most sales leaders and enablement teams view as the “standard” measurements of “grading” new hire success: time to first deal, time to quota attainment, and return on hire. Respectfully, but contrary to public opinion, I don’t believe these measurements accurately reflect the revenue performance we actually want to understand.
In this blog, I will walk you through a case study on how to dissect the financial impact of onboarding and guide you to how you should re-consider your onboarding strategy in order to drive the optimal seller (and revenue) development process.
Analytic #1: Understand the gap between new hire and tenured seller revenue performance
To get started, your benchmark for new hire revenue performance should be the “average annual revenue performance of your tenured reps“. In other words, regardless of “quota” or “goal” or “payback”, what you want your new hires to eventually achieve is the same level of performance as everyone else.
So, ask yourself, do you know what that number is?
As an example, for one particular company, the “gap” between tenured reps and their new hires — even afterTWO full fiscal years — still wasn’t equal. This means that the “true” onboarding development time for their new hires is 3 years.
Embrace that thought for a moment!
If you don’t know at what point your average new hire reaches the average revenue level of your average tenured seller, then you don’t know how long it ACTUALLY takes to onboard a new sales rep.
Analytic #2: WHEN should you hire new sellers? (HINT: the answer is between November and April for a calendar year, or 2 months prior and up to 4 months after the start of a non-calendar-based fiscal year)
In my “Relative Engagement Effect” blogs, Part 1 and Part 2, I explained the impact that sales seasonality has on new hire development and ultimately their individual revenue performance. In those articles I challenged my readers to conduct an analysis based on “Hire Month”.
The chart above shows the average annual revenue for sellers based on when they were hired. I believe that this example of skewed performance (note the months inred) is a common occurrence in companies that have complex or lengthy sales cycles. I have coined this “affliction” as “the Relative Engagement Effect”.
To help you determine if your organization suffers from this effect, ask yourself the following questions. (If you answer “yes” to all of them, then you are likely impacted):
- Does your product set and market require a lengthy sales cycle of greater than 4 months?
- Is Q4 your largest revenue-producing quarter? As a result, during the last 4 months of your fiscal year, does your sales leadership spend a predominant amount of their reps’ attention on closing current opportunities (to some extent sacrificing lead development…)?
- Do you run the majority of your field marketing campaigns and prospect nurturing programs after your sales team conducts its kickoff and territory planning sessions? Do these programs serve as “focal points” for your lead gen and inside sales teams? As a result, do most of your lead conversions occur in the early part of the year (months 3-7)?
If you answered yes, then take the average personal revenue per year (explained below) of your “3rd year” reps for their first two “full” fiscal years (do not count the year they were hired) and organize them by hire month. Check if their new hire performance dips down in the middle months. If so, then the sales seasonality of your business is impacting your new hires’ development more than your onboarding program.
As they say… recognizing that you have this problem is the first step to recovery.
Analytic #3: Assess seller performance based on “Class” – Not via general “Stack Rankings” that combine tenured sellers with newer ones
If you can’t change the hiring timing of your company (and, understandably, most companies can’t), then at least manage the expectations of your sales leadership. And the best way to do that is to create a reasonable “stack ranking” comparison of performance by using a BI visualization tool and the concept of “Class”. Let me explain how.
This chart shows a visualization of a seller stack ranking using a BI application called Tableau. Quota Attainment and Revenue Performance are mapped along each axis. Each blue “dot” is an actual salesperson. If we take this chart and do three key things to it, we receive a much better understanding of our sellers’ revenue performance and how they compare to each other:
Step #1: Convert to “Bubbles“ – The “key” to truly understanding the value of one seller versus another comes from understanding how much revenue they generateconsistently (i.e. “year over year”). My recommended approach is to use “Average Personal Revenue Per Year”. In other words, divide the total amount of revenue that the rep has generated since they began and divide that by their number of years with the company (feel free to use quarters, if that’s more appropriate for your business).
When you add the Avg Personal Rev / Yr metric to each data point, the “dots” become “bubbles”. The larger the bubble, the more revenue that rep generates annually. The smaller the bubble, the less revenue that rep generates.
Step #2: Class Colorization – Next, segment your sellers (and colorize each segment) by “Class”.
By segmenting by “class” (i.e. Years 1-2, 2-3, 3-5, 5-7, & 7+), we can now isolate a group of sellers that have “lived through” all of the same market factors: economy, product launch cycles, competitor capabilities, etc.
Step #3: Quadrant Creation – The third step for this analysis is to create a “quadrant” based on “average quota attainment” and “average current year revenue performance”.
This allows you to look at your sellers along two distinct dimensions:
- How did they perform this year in comparison with their counterparts? Were they above average or below average (notice there is no “average”)?
- And, how consistent are they in generating a comparable level of revenue year-over-year?
Example: You can see how three of the four folks in the bottom left have been consistently low performers. The one exception, however, is one of the largest bubbles in this class; therefore, this person has been a consistently high-performer, who just had one bad year.
By adding the concepts of “Bubble”, “Class” & “Quadrant”, you now have a very “clear” way to “judge” each individual seller’s overall performance.
Analytic #4: Controllable events versus uncontrollable ones
I want to go back to this Peter Brand quote from Moneyball: “what I see is… an imperfect understanding of where runs come from…“. As all sellers know, there are things you can control in a sale cycle and things you can’t. A new hire could do everything right tactically, but lose for any number of external factors (politics, acquisition announcements, market upheaval, org structure changes, etc.). Meanwhile, a “below-average” rep can pick up a “blue bird” opportunity where the prospect practically calls in with a purchase order.
In my opinion, judging new hires exclusively by revenue in their first year is NOT an accurate measure of their training and developmental success. What you should focus on are measures that they can CONTROL, which demonstrate competencies that correlate with future success. For instance, here’s a list of “assess-able” activities that illustrate the kind of behavior that should lead to consistent, long-term revenue performance:
- # of self-generated leads based on networking
- # of demand gen lead follow-ups versus # of demand gen leads converted to Stage 2 opportunities (what is their success rate of getting initial or second meetings).
- # of opportunities qualified as “legitimate” prospects (how many leads are qualified in AND qualified out). Two key points here: 1) Qualifying well is a critical skill for sales success. Recording both the INs and the OUTs will help you determine if your reps are professionally mature enough to understand that chasing bad deals is a waste of productivity. 2) On the other hand, unqualified contacts are potential door openers to better contacts. How many new contacts are they able to uncover through their initial conversations?
- # of presentations delivered WITH a business case (if your organization leverages a solution selling model, discovery and value alignment are critical steps. Driving your new hires to uncover / develop a business case compels them to connect the dots between value and business problem)
- Time to First Proposal – Instead of time to first deal, I propose the concept of “time to first proposal”. The process of delivering and articulating a proposal is one of the most beneficial learning processes for new sellers. Focusing them on that customer interaction quickly accelerates their overall learning process.
- Finally, # of proposals delivered versus # of deals closed (when a new hire loses a deal, loss reviews are critical for coaching)
Conclusion
What will these analytics teach us?
The “Bubbleball” examples I showed you above are based on one company. Your own data may be very different. But, what I believe this data is showing us are two key learnings:
- The new seller development time is significantly longer than 90 days. In fact, with your current onboarding approach, it may take years.
- And, the whole point of this analysis and the “Relative Engagement Effect” blog series is to punctuate that real-world customer interactions ARE the best and most impactful training event that your new sellers experience!(These early interactions will mold the client-engaging behavior and long-term sales process of your new sellers. Leaving them to their “personal experience” is a recipe for cementing bad habits and mis-aligned selling tactics).
In fact, it is BECAUSE real-world customer interactions are the biggest impact on the development of your new sellers that your organization needs to SURROUND each of your new rep’s earliest customer interactions with guidance, like pre-call planning, in-call support, and post-call coaching.
Don’t get me wrong: you STILL have to give them the fundamentals, and this may STILL take 60-90 days. But now, IN ADDITION to their 90 day onboarding process, your new hires should also follow a structured, formal, support process for EVERY customer interaction. Just like a hitting coach reviews a batter’s in-game at-bats with video replay, sales managers need to review every customer meeting with their new hire from the perspective that they are going to “coach them up”.
The challenge for our sales enablement community is that they should nowextend their onboarding program to include the first dozen or so opportunities. And, they should support their managers’ coaching sessions with automation tools and documented guidance based on best practices in order to make it easy ANDconsistent.
What I am suggesting are two critical investments:
- View new salespeople as long-term investments. The more “in-game” coaching you provide in their first year will accelerate their “time to average revenue” in fiscal year 2 (versus year 3).
- Ask your sales leaders to commit to a “true” coaching model. But, as sales enablement “service-providers”, leverage automation to deliver “coaching kits” to your managers. Make it easy for them to understand what kind of coaching and guidance is needed at each interaction in all of their new hires’ opportunities.
The most important point is this: your current “90-Day” onboarding process is actually taking years and possibly generating an unhealthy percentage of your sellerchurn.
If you are questioning the capability of a seller with less than two years on the job, your frustration with their performance may be misguided unless you used the right analytics to review their performance against their peers and ensured that they had detailed, tactical coaching in their earliest opportunities. Making this commitment to your new hires will reward your company with better long-term revenue growth.
Chris Patton is a Consulting Practice Lead for the SAVO Group. He specializes in helping clients define both their Go-To-Sale process and their Onboarding process and then implements automation technology that supports and improves them. You can connect with Chris at https://www.linkedin.com/in/citypatton
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