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The Sales Performance Suite

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How To Calculate YOUR Company's Sales Efficiency Index®

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Sales Dashboard

 

New Metric Belongs On Your Sales Management Dashboard

There are four primary, key metrics that belong on YOUR company's sales management dashboard:

  • Actual sales vs. forecast
  • Gross margin vs. forecast
  • New business dollars (includes new accounts)
  • Sales Efficiency Index
The first three are no doubt on your dashboard already. So, what is the Sales Efficiency Index and why is it so important?
 
What Is The Sales Efficiency Index (SEI)?
To begin, let's examine the fundamental meanings of "efficiency."
1. Competency in performance (sales performance)
2. Accomplishment of performance vs. the cost of accomplishment
3. Ratio of output vs. input 
 
Quite simply put, YOUR SEI is the output (measured in gross profit) of your sales team, collective or individual, compared against the total input (measured in dollar cost) of your sales team, collective or individual.  
 
Why Is SEI So Important That It NEEDS To Be On YOUR Sales Management Dashboard? 
  • It is the one and only measurement of true sales efficiency and return on investment in your sales team, collective or individual. 
  • It is the only metric that exhibits cost of the sales team, collective or individual, vs. what that cost produced in profit.
  • SEI is the only impartial, unbiased, true measure of YOUR return on investment in your sales team/individual.
  • It is the best comparative measurement in stack rankings (regional teams and individuals).
  • SEI is the only true measurement of how effectively YOUR sales managers are utilizing YOUR investment in YOUR sales team. It is an excellent measure of "management prowess." 
Your SEI is purely quantitative. It is much more meaningful than most metrics because it does take into consideration sales production (in the form of gross profit) and what YOU have invested to get that production.

How Often Should I Calculate MY SEI?

The answer to that question is determined by the other metrics displayed on your sales dashboard. "Best practices" dictate YOUR SEI should be calculated monthly, quarterly, and annually.

Besides Sales Efficiency, What Other Uses Are There For MY SEI?

Since this is a true measure of return on investment, YOUR SEI is very useful for:

  • Compensation plan modeling
  • Account and territory alignment
  • Management evaluation
  • Fringe benefit changes and their impact on ROI
  • Gross margin analysis 

How Interested Is Your TOP Management In Seeing Their Return on Investment In YOUR Sales Team?

Blog format is not conducive to displaying the electronic calculation for YOUR Sales Efficiency Index. If you would like to have a free, no-obligation calculation and explanation, please click here

Photo Credit: Brianapa's Photostream

Comments

One should be cautious about putting too much weight on CRM software to quantify and "manage" sales efforts from the 'ole "ivory tower". These type of calculations fail to take into account real world factors such as: How did certain "heavy hitter" sales folks get to where they are? More often than not, they have simply been in the right place at the right time, and inherited a great situation from a better sales person or business owner that has either retired, moved on, or been promoted. They are just smart enough not to screw things up, managing to add a new client here and there. Other factors such as the politics of territories,including favoritism, project geographical location vs.home office sales rep (local guy gets paid via larger PO's, location field guy services job for less pay), project bid ($$ volume) allocation fairness, among other real-world issues, cannot possibly be accounted for. Often, your hardest working, best sales person (in terms of organic growth) will appear to be a lower level performer, when actually, they are your best horse in the stable. By now, you can probably see what I think about CRM software. It can and should be a tool and a tool only, used by experienced sales managers that have a real understanding of sales within their respective industry, supported by a company culture that can see past the next quarter. Unfortunately in today's world, the manager of sales is increasingly an IT oriented office person (put nicely), with no clue or ability to understand that he/she is letting the CRM software "tail" wag the sales team "dog", patting themselves on their own backs for the next dashboard stat they just dreamed up to get your "diamond in the rough" down in the trenches fired.....all the while wondering why nothing is happening......  
 
 
 
While a firm needs to consider sales as an investment that needs to be accounted for, more often than not, sales folks are (wrongly) held accountable for an organizations internal issues simply out of their control. On top of that, a lot of folks want sales people to grow their business for FREE (i.e. straight cmmission, draw etc.) But, that's another topic isn't it? 
 
 
 
Posted @ Wednesday, April 21, 2010 4:42 PM by Walt Bell
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