The Bad News: More Reps Are Making Quota

How many of your sales reps made quota last year? That’s an easy one, right? You probably know the answer without even looking. But do you know how that number stacks up against your peers? Or how the length of your sales cycle or the percentage of your presentations that result in a sale compare to those of other companies? Those are some of the metrics evaluated in CSO Insights’ 11th annual research effort, “Sales Effectiveness Insights – 2005 State of the Marketplace Review,” which focuses on analyzing sales effectiveness. The study, based on data from professionals directly involved in sales management at 1,040 different firms, examines the business goals companies have for their sales organizations, the challenges and barriers effecting salespeople’s ability to achieve those goals, the strategies and tactics organizations are implementing to deal with issues and the results firms are achieving. Barry Trailer, a partner at CSO Insights, says the following are some of the most notable findings in the 200-page report.

1. More reps are making quota, but that’s not necessarily good news. In 2004 58.2% of salespeople met or exceeded quota, a 16% improvement over the previous year. Great news, right? Not necessarily, says Trailer, because none of the other key performance metrics improved. “We are still taking too long to get new reps up to speed, still seeing low win rates and reps are continuing to use discounts far too often to close business,” he says. This means performance improved because sales reps are working harder, not smarter. They’re simply putting in more hours to achieve quota, and that’s not sustainable. “If sales reps intend to improve their performance by working 5, then 10, and then 15 more hours each week, pretty soon they are going to hit a physical limit,” Trailer cautions. The key for the coming year, he adds, is for organizations to leverage people, process, technology and knowledge in innovative ways to sell more effectively.

2. Voluntary sales force turnover rates are becoming a cause for alarm. Of all the data contained in the report, the sales force turnover rates caused CSO Insights the most concern. Voluntary turnover jumped from approximately 19% in 2003 to 32% in 2004. Involuntary turnover rose from 15% in 2003 to 18% in 2004. In all, 50% of the sales force left companies last year. “The trend is a significant cause for concern, as an unplanned rise in the turnover rate can have a devastating effect on a sales organization’s ability to hit its overall revenue targets,” says Trailer. To drive home that point, the study shares an exercise conducted by the CSO of a software firm. He plotted the revenue contributions of his sales team members by tenure as a baseline number and then calculated what it cost the company when one of those reps left and was replaced with a new rep. The CSO found it cost the company $1.2 million every time an experienced rep walked out the door voluntarily. What would that number be for your company? To stem the flow, Trailer says, you must dig to find out why reps are leaving and address the problem head-on.

3. Two-thirds of companies aren’t creating and maintaining good references. CSO Insights’ buying studies show that references are one of the most effective tools a vendor has to ensure they make the short list. Yet two-thirds of companies rate themselves average or below in their ability to create and maintain good references and case studies. Even those companies who rated themselves as very good or world class at implementing effective customer care programs saw a 15% to 20% drop in their ability to maintain customer references. This is an area that companies must focus on this year because the payoff will be high. “The bottom line,” says Trailer, “is that you need to assign a champion to manage this critical task if it is going to get done.”

The complete study costs $295 and can be ordered at www.csoinsights.com.