The Oxford English Dictionary offers two definitions for productivity. The first is "the state or quality of being productive." The second is the economic definition, which reads, "The effectiveness of productive effort, especially in industry, as measured in terms of the rate of output per unit of input." This second definition is more helpful for our purposes because it includes both the input and the output.
Measuring productivity for some sales activities is easy and for others it is more difficult. When it is difficult to confirm the output of an activity, we must use a proxy measure for productivity. One of the most important reasons to measure your productivity is because it can help you measure your effectiveness in a particular activity. Let's begin with something that is easy to measure, your sales productivity.
How to Measure Cold Call Sales Productivity
Of all the activities salespeople engage in, the one that is subject to low productivity is cold calls. This activity is fraught with waste, as you can make many calls but yield fewer conversations and first meetings. Let's look at two ways to assess your productivity in sales.
The first way to assess your cold call sales productivity is to do some simple math. Divide the number of meetings you booked by the number of calls you made over an hour. For example, 2 booked meetings/30 dials = 6.6%. This number doesn’t tell the whole story, though. The 28 dials where no one answered the phone say little about your actual sales productivity, so I recommend removing those from this calculation. In that case, you replace the total number of dials with the number of conversations you had with contacts; the number of booked meetings doesn’t change: 2 booked meetings/3 conversations = 66.7%. The more effective you are at gaining a meeting, the greater your productivity.
There is another way to assess your sales productivity metrics related to cold calls. Look at all the deals you won over the last quarter and divide it by the revenue generated by cold calls versus revenue from other sources. The results can be enlightening, whether you are calculating them for yourself or your team. For example, imagine that in the last quarter your team made $1.8 million in total revenue, and $1.6 million of that came from cold calls. You would calculate your cold call productivity as: $1,600,000/1,800,000 = 89%. Because this method is based on revenue rather than on the number of calls made, your data automatically eliminates unanswered calls.
Productivity in the Sales Conversation
Productivity in the sales conversation isn't easy to measure, but it is important to your success. What makes this so tricky is that the outcome is difficult to assess. One outcome of a sales conversation is creating value for your contacts, and different clients are likely to find value in different conversations. Because this outcome exists between the contact's ears, it is difficult to assess. Another outcome of a sales conversation is creating a preference to work with you, which could eventually lead to the contact allowing you to help them improve their results. Both of these outcomes are nebulous, so we must use a proxy outcome to determine how productive the sales conversation is. As our proxy, let's use the client’s commitment to another conversation.
Imagine you have three first meetings with new contacts this week. When your meeting with Contact A ends, you ask them to meet again to share what's working and what's not, so you can help them and their team recognize why they should change. You created value in your meeting with Contact A, so they agree to schedule another conversation. Your meeting with Contact B doesn't go so well, and they ask you to call them next week, even though they have decided they will not meet with you again. Your meeting with Contact C goes well, and you schedule another conversation with them for the following week.
Two out of three meetings resulted in commitments to have a second conversation: 2 booked second meetings/3 first meetings is 67.7%, a fine sales productivity metric. Converting first meetings to second meetings is increasingly difficult for salespeople and sales organizations who use a legacy approach because they lack a focus on creating value for the contacts. In other words, their meetings are not productive.
Your Win Rate, Your Quota, and Sales Productivity
Your win rate is one way to measure your overall effectiveness in sales. However, it isn't a great metric when it comes to your sales productivity. A salesperson who wins a single client may have a 100% win rate because that was the only deal they pursued and won. Furthermore, this salesperson might have won the deal because his uncle owns the client company. You should, however, look at your win rate and work to improve your effectiveness.
Because your effort and activity are supposed to help you attain or beat your target, quota attainment is a better measure of your or your team's sales productivity metrics. The average person works around 2,000 hours each year. That is the time you have to create and win the new opportunities you need to reach your target. The hours wasted make it more difficult to reach your goal.
The salesperson with a quota of $1,000,000 has 2,000 working hours to produce that result. The salesperson that produces $500,000 has a lower productivity score than the salesperson who reached the million-dollar goal. It is possible the salesperson who failed to reach their goal worked every one of their 2,000 hours, only to come up short. Meanwhile, the salesperson that reached their goal spent half their time browsing the internet and still hit their target. This highlights why the number of hours a person works doesn’t matter as much as how effective they are. It is the salesperson's effectiveness that produces differences in sales productivity, and using a salesperson’s win rate is the best way to gauge this.
How to Measure the Sales Leader's Productivity
It wouldn't be fair to assess sales productivity without mentioning the impact and responsibilities of sales managers and sales leaders. Using quota attainment as the outcome, the sales leader's productivity is the percentage of the salespeople that reach their quota. For example, a sales manager with half of the salespeople reaching quota has a 50% sales manager productivity metric.
The key to improving sales productivity is to improve sales effectiveness. When salespeople are more effective in the sales conversation, their productivity increases and they remove wasted time and effort that doesn’t produce the desired result.
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