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Published by Soundview Executive Book Summaries, P.O. Box 1053, Concordville, PA 19331 USA © 2009 Soundview Executive Book Summaries • All rights reserved. Reproduction in whole or part is prohibited. Concentrated Knowledge™ for the Busy Executive • www.summary.com Vol. 31, No. 2 (2 parts), Part 2, February 2009 • Order #31-05 CONTENTS Sources of Competitive Advantage Page 2 The Power of Sales Benchmarking Page 3 Diving Deeper Into Sales Benchmarking Page 4 Five Steps to Effective Sales Benchmarking Page 5 Call to Action Page 7 Overcoming Implementation Obstacles Page 7 Case Studies Page 8 Greg Alexander, Aaron Bartels, and Mike Drapeau Making The Number How to Use Sales Benchmarking to Drive Performance THE SUMMARY IN BRIEF In Making the Number, the authors make a convincing case for improving the sales function of an organization through benchmarking. Sales benchmarking, they explain, takes the guesswork out of sales and turns the sales function into a highly predictable, dependable engine that ultimately increases shareholder value. Greg Alexander, Aaron Bartels and Mike Drapeau first explain why sales benchmarking is valuable for the sales force, for executives and for sales profession- als. Then, they break down benchmarking, delving into process, strategies, best practices and world-class status. Next, the authors identify and expound on the five steps to effective sales benchmarking: metric identification, data collection, comparing and contrasting, focused action and sustained improvement. Understanding that there will be resistance inside organizations to sales bench- marking, they list the most common objections and provide responses for sales leaders who wish to implement sales benchmarking. Finally, they let benchmark- ing speak for itself through case studies of companies that have successfully employed sales benchmarking. IN THIS SUMMARY, YOU WILL LEARN: • Why sales benchmarking should replace the concept of sales as an art • How sales benchmarking can increase company profits • How to increase a salesperson’s annual sales • The five steps to effective sales benchmarking • How to overcome objections to sales benchmarking within your organization • How to overcome implementation obstacles to sales benchmarking • How other companies succeeded with sales benchmarking SOUNDVIEW Executive Book Summaries ® www.summary.com Sales: Management February 2009

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Page 1: Making the Number

Published by Soundview Executive Book Summaries, P.O. Box 1053, Concordville, PA 19331 USA© 2009 Soundview Executive Book Summaries • All rights reserved. Reproduction in whole or part is prohibited.Concentrated Knowledge™ for the Busy Executive • www.summary.comVol. 31, No. 2 (2 parts), Part 2, February 2009 • Order #31-05

CONTENTSSources of CompetitiveAdvantagePage 2

The Power of SalesBenchmarkingPage 3

Diving Deeper Into SalesBenchmarkingPage 4

Five Steps to EffectiveSales BenchmarkingPage 5

Call to ActionPage 7

OvercomingImplementationObstaclesPage 7

Case StudiesPage 8

Greg Alexander,Aaron Bartels, and

Mike Drapeau

Making The NumberHow to Use Sales Benchmarkingto Drive PerformanceTHE SUMMARY IN BRIEF

In Making the Number, the authors make a convincing case for improving thesales function of an organization through benchmarking. Sales benchmarking, theyexplain, takes the guesswork out of sales and turns the sales function into a highlypredictable, dependable engine that ultimately increases shareholder value.

Greg Alexander, Aaron Bartels and Mike Drapeau first explain why salesbenchmarking is valuable for the sales force, for executives and for sales profession-als. Then, they break down benchmarking, delving into process, strategies, bestpractices and world-class status.

Next, the authors identify and expound on the five steps to effective salesbenchmarking: metric identification, data collection, comparing and contrasting,focused action and sustained improvement.

Understanding that there will be resistance inside organizations to sales bench-marking, they list the most common objections and provide responses for salesleaders who wish to implement sales benchmarking. Finally, they let benchmark-ing speak for itself through case studies of companies that have successfullyemployed sales benchmarking.

IN THIS SUMMARY, YOUWILL LEARN:

• Why sales benchmarking should replace the concept of sales as an art

• How sales benchmarking can increase company profits

• How to increase a salesperson’s annual sales

• The five steps to effective sales benchmarking

• How to overcome objections to sales benchmarking within your organization

• How to overcome implementation obstacles to sales benchmarking

• How other companies succeeded with sales benchmarking

SOUNDVIEWExecutiveBook Summaries®

www.summary.com

Sales:Managem

entFebruary 2009

Page 2: Making the Number

Sales Benchmarking:The Time Has Come

In order to appreciate why sales benchmarking is criti-cal for executives, managers and front-line salespeople, itis necessary to take several steps backward. In doing this,consider some macro trends that are shaking up corporateAmerica and how this is impacting the sales profession.

There has been an ongoing debate on the significanceof globalization, even as its reality is now too well estab-lished to deny. To understand how your organizationmight form a coherent and compelling response to thethreat of global competition, let us examine the sourcesof competitive advantage.

Sources of Competitive AdvantageMichael Porter has published two seminal works on

this topic — Competitive Advantage and CompetitiveStrategy. Porter outlines three basic approaches organiza-tions can use to establish and maintain competitiveadvantage in their respective marketplaces:Overall cost leadership describes how companies

can achieve and defend a low-cost provider position, yetretain enough return to sustain the business modelachieved through technology, labor force selectivity oreven process innovation.Focus is built around the ability to orient a product

or service toward a specific market segment, buyinggroup or geographic market. It succeeds when you canconvince the customer that the higher price is worth thevalue you deliver. This can be a long-term profitableapproach but is limited by the size of the chosen targetmarket; the larger the market, the more likely it is thatthe twin strategic forces of cost and differentiation will

make the focus strategy more difficult to defend.Differentiation is fixated on establishing and leveraging

the uniqueness of a product or service such that customersdemand it from the supplier and substitute offerings areinsufficient. Customer service is the most sustainable differ-entiation strategy available to 21st century companies.

Customer ExperienceThe Internet has armed the consumer against ineffective,

legacy corporate messaging efforts. The sales professionmust understand that marketing departments have alreadybeen disintermediated by citizen marketers. Sales is next.

Consider these statistics:• The average shelf life of a sales manager is

15 months.• Nearly four out of 10 salespeople will lose their

jobs this year.• An average of 27 percent of salespeople do not

produce enough even to cover their loadedemployment costs.

Armed with these numbers, CEOs will increasinglydemand quantitative evidence that supports whatever thesales leaders are trying to sell to senior managementabout their ability to hit the number. No other functionwithin a company is allowed to underperform this way.

The Sales ForceThe bottom line is that salespeople who miss their

numbers cost the company.Many organizations are prevented from achieving their

revenue goals or improving market penetration becausethey embrace a mind-set that there is an intangible“golden secret” to the sales profession — something thatsimply can’t be quantified. Many CEOs have been

THE COMPLETE SUMMARY:MAKING THE NUMBERby Greg Alexander, Aaron Bartels, and Mike Drapeau

2 Soundview Executive Book Summaries® www.summary.com

The authors: Greg Alexander is the co-founder and CEO of Sales Benchmark Index and president of the Atlanta chapter ofSales & Marketing Executives International. Aaron Bartels and Mike Drapeau are co-founders and executive vice presidents ofSales Benchmark Index. The three authors live in Atlanta.

Making the Number by Greg Alexander, Aaron Bartels, and Mike Drapeau. Copyright © 2008 by Sales Benchmarking Index.Summarized by arrangement with Portfolio, a member of Penguin Group (USA) Inc. 302 pages. $29.95. ISBN 978-1-59184-217-0.

Summary copyright © 2009 by Soundview Executive Book Summaries, www.summary.com, 1-800-SUMMARY, 1-610-558-9495.For additional information on the authors, go to: http://www.summary.com.

Published by Soundview Executive Book Summaries (ISSN 0747-2196), P.O. Box 1053, Concordville, PA 19331 USA, adivision of Concentrated Knowledge Corp. Published monthly. Subscriptions: $209 per year in the United States, Canada andMexico, and $295 to all other countries. Periodicals postage paid at Concordville, Pa., and additional offices.

Postmaster: Send address changes to Soundview, P.O. Box 1053, Concordville, PA 19331. Copyright © 2009 by Soundview Executive Book Summaries.Available formats: Summaries are available in print, audio and electronic formats. To subscribe, call us at 1-800-SUMMARY (610-558-9495 outside the United Statesand Canada), or order on the Internet at www.summary.com. Multiple-subscription discounts and corporate site licenses are also available.

Rebecca S. Clement, Publisher; Sarah T. Dayton, Editor in Chief; Andrew Clancy, Senior Editor; Christine Wright, Senior Graphic Designer; Carol Carter, Contributing Editor

[email protected]

Page 3: Making the Number

cautious in demanding accountability of the sales leaderin the same way that they have of the other functionalheads. The “hall pass” that sales executives have receivedfrom their CEOs is coming to an end.

Sales benchmarking can dramatically increase revenuegrowth and decrease cost of sales. �

Sales Benchmarking:What’s in It for the Executives?

The importance of benchmarking lies in its abilityto increase profits and positively impact each businessfunction within the organization. There is nothingdifferent when it comes to sales.

The application of benchmarking to the sales functioncan be so transformative that it should be a matter ofinterest from the individual sales reps all the way up tothe corporate boardroom.

No matter who you are in a public firm — salesper-son, sales leader, CEO, CFO or board member —shareholder value affects you. Shareholders control thefirm and are focused on maximizing shareholder value.A board of directors focused on sales performanceshould embrace sales benchmarking because it improvesshareholder value.

Conflicts between management and shareholders arisewhen corporations pursue managerial goals at theexpense of shareholder goals. Sales benchmarking helpsrealign them again.

The Power of Sales BenchmarkingLet’s look at the fictional company Consolidated Inc.

to see the power of sales benchmarking. Assume thatConsolidated will generate $1.1 billion in revenue dur-ing the next fiscal year and will have earnings of $55million, an EPS (earnings per share) of $1.10, and a P/E(price/earnings) multiple of 20. This will translate into ashare price of $22 and a market cap of $1.1 billion.Consolidated expects to enjoy a return on investment0.4 percentage points behind the average — if it hits itsnumbers. This is where the sales-benchmarking disci-pline can be used to improve Consolidated’s situation.

Consider if, in the first year, Consolidated cuts backon those expense items that are least likely to negativelyimpact the top line. Using this low-risk, cherry-pickingapproach, Consolidated is able to reduce its cost of salesby $22 million, resulting in an earnings growth of nearly7 percent rather than 5 percent. This approach wouldgenerate $77 million in earnings, compared to the previ-ous estimate of $55 million. EPS will now be $1.54 (up

from $1.10). With a P/E ratio of 20, the stock will nowbe valued at $30.80 per share, driving market cap up to$1.54 billion. The result of this seemingly low-impactsales expense reduction effort is more than $440 millionin increased shareholder wealth.

Following is a list of some of the sales metrics againstwhich companies can benchmark themselves to achievetop-line revenue improvements:

• Sales productivity per sales rep• Ramp time to full sales productivity• Annual sales rep turnover rate• Sales rep time allocation• Sales deal size• Sales cycle length• Close rateBy analyzing and improving performance in these

dimensions, companies can determine the extent ofshareholder wealth that can be created.

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Why Should a CEO EmploySales Benchmarking?

Most CEOs did not rise through the sales function.As a result, they don’t really understand sales. Withsales benchmarking, CEOs can accelerate theirknowledge of the sales department’s capabilities.

Much like CEOS, other key members of the lead-ership team also often have no experience in sales.This prevents many members from contributing tothe overall effort of growing revenue. Sales bench-marking provides the CEO with a tool to educateother leaders in the organization in a language thateveryone can understand — numbers.

When a CEO is armed with an objective analysisof the sales department, he can better direct otherparts of the company about exactly how to enablethe sales force to grow new sources of revenue.Sales benchmarking allows CEOs to explain to asales force its specific role in bringing the corpo-rate vision to life. It gives the CEO the chance toconvince the sales force why the vision is viableand calculates the payoff for the sales department ifit is able to successfully execute it.

Sales benchmarking transforms the sales depart-ment’s capabilities from tribal knowledge to a bas-tion of intellectual property embedded in companysystems. This reservoir of data forms the basis for anew sales culture and more predictable salesbehavior patterns.

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Business BenchmarkingBenchmarking is one of the most universally effective

management disciplines available in business today. Butit will not correct a flawed business model nor will itforce an organization to make the necessary changes —that is the job of the leader. It does, however, serve up awealth of positive possibilities.

Sales benchmarking helps organizations understandhow to use data to uncover the root cause of individualsales problems. �

Diving Deeper IntoSales Benchmarking

The four key assets that must be evident to ensure aneffective sales-benchmarking initiative are a sales-bench-marking taxonomy and a sales-benchmarking repository,along with automation technology and subject-matterexperts. A taxonomy should cover, at a minimum, thedefinitions for all data inputs, metric formulas renderedfrom these inputs and sales processes into which thesemetrics are grouped.

A sales-benchmarking repository is a robust, extensive,layered, archival, verifiable and integrated data resourcethat possesses a series of attributes, including industrysegments, geographical areas, sales channels, salesforce/organization, company type and history.

Sales-benchmarking automation technology enables aseries of steps from data collection to analysis to display

long-term integration.Sales-benchmarking subject-matter experts perform a

variety of assessment and analytical tasks.

Process Sales Benchmarkingand Strategic Sales Benchmarking

The majority of sales professionals find themselvesworking for organizations that have poorly designedprocesses, rather than no process at all. Poor processdesign manifests itself in inaccurate workflows, badgovernance, inadequately defined roles and insufficientstandard operating procedures.

Process is the road map by which sales gets thingsdone. Sales managers who say “Too many deals fail toprogress from upside to forecast” or “Why does it seemthat it takes so long for new hires to become produc-tive?” are giving voice to the fact that the process isinsufficiently defined or poorly controlled.

The purpose of process sales benchmarking, accordingto John Davis, who wrote the book Magic Numbers forSales Management: Key Measures to Evaluate Sales Success, isto identify the “most effective operating practices frommany companies [in a peer group] that perform similarwork functions.” When an organization is able to elevatean entire sales process so that it attains world-class status,it can achieve breakthrough performance improvements.

Strategic benchmarking examines how companiescompete. It involves considering high-level aspects suchas core competencies, development of new products andservices and improved capacity for dealing with changesin the external environment.

Strategic benchmarking helps identify winningapproaches that have enabled world-class companies tosucceed in their respective marketplaces.

At its most basic level, strategic sales benchmarkingusually reveals some sort of indication of which processareas are deficient and by how much.

Best Practices and the Importanceof Being World-Class

Best-practices benchmarking is about understandingand improving the processes within the business, notabout comparing sets of numbers. It is what comes afteryou have diagnosed the problem areas and quantified themagnitude of the opportunity for financial gain. Best-practices benchmarking is the how of closing the gapbetween current performance and an improved one.

Best-practices benchmarking encompasses theeffort necessary to:

• Identify those companies that are known for

Summary:MAKING THE NUMBER

What Sales Benchmarking Isand What It Is Not

4 Soundview Executive Book Summaries® www.summary.com

Page 5: Making the Number

excellence in a certain discipline or process.• Gain agreement from them to study their unique

set of policies, operating environment and tech-niques.

• Determine if and how this discipline should bemodified so that it can be imported into yourorganization’s unique culture and systems.

• Make those modifications.• Implement the new discipline/process and enter

into a cycle of continuous improvement.Every organization has the potential to field a world-

class sales force. To get there it takes a firm commitmentto deploy benchmarking as a habit. There are many dif-ferent techniques to measure world-class status – a bot-tom-up approach through individual metrics, one thatfocuses on the sales process and one that takes an overallview. All are potentially valid. Once your sales organiza-tion has been benchmarked against your peers andworld-class performance, you can then develop a plan toconsistently outsell the competition.

The Self-Aware Sales ForceSales benchmarking is not a one-size-fits-all proposition.

Organizations and their sales forces have distinguishingcharacteristics that influence whether and how theyshould be compared to each other. The results of salesbenchmarking — metrics, scores, gaps, comparisons — allneed to be evaluated when they are finally produced.

Sales forces can best be characterized by their domi-nant trait, which typically falls into one of the followingsix categories:

• Delivery. Example: courier services• Order taking. Fulfilling demand. Example:

Internet orders• Missionary. Educates the marketplace to build

brand awareness• Technician. Sales reps who cannot complete a

sale without the direct assistance of a presales engi-neer

• Demand creator. Classic transaction-based,business-to-business sales force

• Solutions provider. Focused on solvingcustomer problems

With the sales category determined, the next step is toperform a snapshot analysis of your sales force maturity.The five levels of sales management maturity are, fromleast mature to most mature:

• Level 1: Chaos. Processes, if they exist, areill-defined and unmanaged.

• Level 2: Defined. Most sales processes have beendeveloped and documented.

• Level 3: Reportable. Sales processes have beenadopted by the sales force.

• Level 4: Managed. Sales management team reliesprimarily on quantitative internal data.

• Level 5: Predictable. Sales management team isable to sufficiently predict sales performance. �

Five Steps toEffective Sales Benchmarking

Now that benchmarking has been defined and itsapplicability to the sales function understood, how doyou get started? Benchmarking is a data-intensive exer-cise and derives its value from comparing information atdifferent points in time. The first step in executing asales-benchmarking effort is to identify which key sales-related metrics to measure.

Metrics Identification (Step 1)It is unreasonable to think that any organization could

measure (or would want to measure) every possible salesmetric. Therefore, the first step is to pare down the pos-sibilities to a strategic list of 20 to 40 that are judged thebest indicators of future performance and have the great-est likelihood of positively impacting the organization.

By using the customized approach, organizations gaincontrol over the metrics and their input definitions, but

Summary:MAKING THE NUMBER

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Sales Force ManagementMaturity Model Scale (SM3)

Page 6: Making the Number

they may find themselves without meaningful externaldata sets for comparison. Identifying the strategic metricsyou want to measure will teach you a lot about yourorganization. Most companies have never thought of theirsales performance in terms of a prism like the formula forsales success or ever considered measuring their sales forceaccording to the many metrics from which to choose.

Data Collection (Step 2)The Data Collection step is the most labor intensive of

the benchmarking process, but it is necessary in orderfor the organization to determine how it stacks up, bothinternally against past performance and externally againstpeers and world-class entities.

Sales benchmarking is concerned with both qualitativeand quantitative data. It uses descriptive statistics todepict raw data patterns and inferential statistics to lever-age the power of leading indicators.

Sales benchmarking uses sampling to draw conclusionsabout a sales population (perhaps all sales receipts in themonth of November, for example). If performed in theproper, nonbiased manner, sampling can support statisti-cal results with sufficiently high precision.

The goal of data collection is to have a statisticallyvalid sample that can be used to identify where anorganization is underperforming or overperforming inrelation to its peers and other world-class organizations.

Compare and Contrast (Step 3)Compare and Contrast describes the actions necessary,

after having collected the internal data and assembled therelevant peer group data, to compare them to eachother. This comparison effort requires the use andunderstanding of a series of statistical techniques thathelp benchmarkers better interpret the data. In this way,organizations can determine how they stack up againstpeers and world-class organizations and, more important,they can determine the magnitude of any return they arelikely to receive by closing these gaps. Usually thesefindings are summarized in some sort of report that goesto the board for review.

Some sales benchmarkers prefer to highlight areasof weakness and strength with graphical flourish.They draw big red circles around the sales metricresults that contribute disproportionately to failureand big green circles around those metrics whereperformance is well above the peer group and occasion-ally above world-class. This latter indication identifiescenters of competency that are every bit as importantas determining where improvement must be made toexposed areas of weakness.

Whatever the format or version this report takes, itshould clearly indicate the gaps by sales metric and sum-marize the financial opportunity for improvement.

Focused Action (Step 4)Focused Action is the antidote for the typical sales leader

who is urged to implement a major improvement programacross the board as soon as possible without first havingensured success through a well-designed pilot effort.

Focused action is based on the concept of hypothesistesting. Hypothesis testing provides managers with astructured analytical method for making decisions insuch a way that the probability of error can be con-trolled or at least measured.

Sales Benchmark Index recommends a seven-stepmethodology to help organizations identify, test andselect the most effective solutions to the business prob-lems exposed by sales benchmarking.

1. Frame the Problem. Define the problem beingaddressed in specific terms.

2. Develop Hypotheses. List potential causes for theproblem and key drivers that impact or influenceeach potential cause.

3. Gather Data. Gather relevant data, information andbackground on the key drivers that will allow eachpotential cause to be proved or disproved.

4. Test Hyphotheses. Analyze each potential cause todetermine if the data supports the hypothesis asthe most likely cause of the problem.

Summary:MAKING THE NUMBER

6 Soundview Executive Book Summaries® www.summary.com

What Are the Focus Areas ofStrategic Benchmarking?

Typical focus areas for strategicbenchmarking include:• Acquisition strategy• Business partnerships and strategic alliances• Competitive dynamics• Core competencies• Foreign markets• Marketplace segmentation• Outsourcing, offshoring and

insourcing opportunities• Process capabilities• Product offerings and product development• Service portfolio• Strategic intent• Technology enablement

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5. Create Solutions. For those hypotheses that prove tobe valid, identify possible solutions and examine eachsolution’s feasibility for successful implementation.

6. Develop Plans. For those solutions determined tobe viable, estimate all necessary tasks, investments,milestones, resources, metrics and returns.

7. Select Solutions. Determine which solutions shouldbe implemented using some form of programapproval criteria (e.g., hurdle rates for internal rateof return, or IRR).

Sustained Improvement (Step 5)Completing Step 5 — Sustained Improvement — will

ensure sustainability for the benchmarking program.Is sustainability possible? Much research has been done

on the tendency for corporate performance to revert tothe mean. Although the details are somewhat arcane, theconclusions lend powerful support to the notion thatbenchmarking, as a form of modeling, can improve anorganization’s chances of staying continuously above thenorm in performance.

Sustained competitive advantage is the goal, and it willbe obtained only if the program transitions from a one-time event to being one that is thoroughly embedded inthe company’s operating procedures.

Sales benchmarking can become standard operatingprocedure without replicating the heavy lifting ofSteps 1 through 4. The benchmarking process canbe administered by a small number of staff members.When an organization is ready to move thebenchmarking process into the mainstream of itssales operations system, it should implement a formof quality improvement.

Control charts monitor variations in data, highlightingtrends that allow for correction before a process gets outof control. Control charts show when variation is due toa special cause and help highlight problems that need tobe corrected.

Implementing the techniques of statistical processcontrol and applying them to the sales force willenable sales benchmarking to transition to a best practiceinside a company. �

Call to ActionSales leaders have very strong personalities. They

sometimes suffer from the “not invented here” syn-drome, particularly with regard to any attempt to changesales processes, tactics or strategies that did not originatewithin their organizations.

Overcoming Objectionsto Sales Benchmarking

There are several common objections that sales leaderstend to present when faced with the question ofwhether to adopt sales benchmarking. Each one can beovercome. One objection is that “Sales benchmarking isa fad.” This objection has some teeth in that innovativeconcepts can boast of longevity only if they yield con-tinual value for those who adopt them. From a “logical”perspective, sales force leaders should adopt sales bench-marking as a means of driving improvements in theirbusinesses. However, when assessing the advisability ofsuch “risky” ventures, emotions can affect our decisions.And fear, the most powerful of all negative emotions,can distort otherwise rational views and prevent salesbenchmarking from gaining a foothold.

Another objection is “Sales benchmarking won’treally work.” The counterargument is salesbenchmarking delivers large, company-changingresults. It is a “skewed bet” that presents a large payoffwhen allowed to succeed.The key question to ask whencomparing sales benchmarking to other sales ideas isnot how likely it is that it will work, but how muchwill be gained when it does work. It is the magnitudeof the outcome that counts.

One additional example of an objection is “Thingsare going well — we don’t need it.” The responseis that sales benchmarking allows a company and asales leader to compare themselves against a large samplesize. This raises the bar to what is possible. It is acommon occurrence for a sales leader to mine internaldata and present it in such a way that makes seniorleadership feel good about the results. But when thefirst quarterly target is missed, the sales executive isgreeted with looks of astonishment. Objectivity andexternal measurement are musts.

Overcoming Implementation ObstaclesYou may be tempted to think that obstacles pose too

stiff a challenge. Maybe you are beginning to believethat deployment of sales benchmarking would be toodifficult and time-consuming. Overcoming these chal-lenges appears daunting and putting forth the effortseems perilous, but for those who leave their comfortzone to adopt benchmarking, the results will be dynamic— competitors will be eclipsed and business trans-formed. Despite the obstacles, sales benchmarking can bedeployed with success.

For those few CEOs still resistant to the idea thatthe sales leader should be a key participant in strategy

Summary:MAKING THE NUMBER

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Page 8: Making the Number

creation, a mountain of literature argues to the contrary.The key to this discussion is making sure that the CEOunderstands that the sales organization is crucial to strate-gic plan execution. This justifies a sales seat at the table.

Sales leaders must master the discipline of changemanagement and ensure that their own sales forces donot derail an otherwise well-constructed benchmarkingimprovement program. Developing staff behaviors con-ducive to change management will be the best approachto achieving sustainable success with sales benchmarking.

Do you have the organizational fortitude to introducesales benchmarking? It is true that embracing salesbenchmarking can be risky, and there are few sales lead-ers currently doing so. Many will doubt the worth ofsales benchmarking, and you will face some doggedresistance. But persevere, address the obstacles and theresults will be dramatic. �

Case StudiesTwo real-world examples of sales benchmarking follow:

Discover Financial ServicesCredit, Debit, Stored-value Cards

In an effort to increase acceptance of DiscoverNetwork-issued cards and grow its transaction volume,Vice President of Sales Gerry Wagner and his team haveconducted extensive analysis, identifying areas forimprovement. They have studied their accounts todetermine levels of transaction volume. These metrics,along with several submetrics, are the key drivers oftheir success.

When Gerry and his team identify a gap in accep-tance, they gather external data from sources such as theNielsen Report to identify partners that can perform theactivities necessary to close the gap.

Discover brings innovative offerings to market in aneffort to convert more of the available market toDiscover transactions. Each product’s effectiveness ismeasured in conversion rates. Each new program has avolume goal, which is then projected on a percentagebasis to a group of merchants.

Gerry gathers real-time data comparing actual results togoal results and determines the variance. Armed with thislevel of granularity, Gerry can speak to his team membersresponsible for the program and the merchant, and makemidcourse corrections in order to drive volume.

Nine years ago, Gerry had approximately 700 peoplein his sales and service force. Today, he has around 150.The key difference between then and now is that Gerry

now outsources the acquisition of small-business ownersto an independent network of sales professionals whowork on a commission basis. This has dramatically low-ered his acquisition costs, while significantly and rapidlyexpanding acceptance points for Discover.

Discover invested in the proper infrastructure to sus-tain its level of performance. It streamlined its processes,allowing for few people to produce high levels of pro-ductivity. The resources deployed are focused and theorganization’s priorities are clear to all.

Covad Communications GroupBroadband Innovation

Covad’s leads are generated primarily from threesources: marketing, customer referrals and old-fashionedcold calling. In the past year, David McMorrow,executive vice president of worldwide sales, and histeam performed a lead-generation benchmark whereclosed sales were tracked back to the originating activity,with effectiveness measured in terms of closed businessper dollar spent generating the lead.

For the first time, Covad could clearly ranklead-generating activities in terms of the returnsthey produced. These findings revealed that thetraditional investments they were making in radio andprint were largely ineffective. After deploying a pilot,Covad rolled out a new program focused on searchengine optimization. The result was a 30-percentimprovement in yield in the first year, measured asa dollar earned compared to a dollar spent.

Covad measures several metrics, including customerchurn, deal size, revenue per sales rep, channel yield,rate of upsell/renewal and post-sale cancellation. Covadlearned that the primary events leading to customer“fallout” were typically a rough implementation, an out-age or renewal time. It has cut its churn in half, but it isstill almost a percentage point above the industry bench-mark. Customer churn and fallout, the two items thathave the largest impact on companywide profitability,will continue to be an area of focus. �

Summary:MAKING THE NUMBER

8 Soundview Executive Book Summaries® www.summary.com

RECOMMENDED READING LISTIf you liked Making the Number, you’ll also like:1. The Perfect Salesforce by Derek Gatehouse. Gatehouse argues that sales

is about people, different types of people who excel naturally in differenttypes of sales jobs.

2. Exceptional Selling by Jeff Thull. Strategist Thull shows readers how tocreate a different kind of relationship with the customer and use powerfuldiagnostic principles to reframe the typical sales conversation.

3. Driving Change by Mike Brewster and Frederick Dalzell. To most people,UPS is a reliable fact of life. But to well-informed businesspeople, BigBrown is a company to emulate. Learn from its success.