Think of old-school sales leaders: People in suits shouting at the sales team, laser-focused only on what’s closing this month and racking up plenty of frequent flyer miles and steak dinners. (Are you picturing Alec Baldwin, yet?)
That style of leadership revolves around one metric: results. Closed won, sales, MRR, new logo, revenue – call it what you will. A lagging indicator by any other name would smell as sweet.
Research from Vantage Point Performance and the Sales Education Foundation found that 24% of metrics used by sales leaders are business results (lagging indicators). However, there’s a problem with results-based management:
As a metric, business results cannot be directly managed.
Business results reveal the impact of what your sales team has done in the past, not what you can manager or control in the present. Every day, sales reps perform a cascading chain of activities they hope are going to ultimately lead to results.
If you’re only results-oriented, there’s a danger there of creating a high-pressure system where people get disengaged very quickly, as 10-year sales veteran Ashley Shaw warns. Reps are busy responding to emails, talking to customers and dealing with support issues, but they aren’t really sure where to focus their time to get the desired results.
The good news is that you can reach desired business results by managing those sales rep activities that precede them. This is the idea behind activity-based selling.
What is activity-based selling?
Activity-based selling is managing the controllable activities that your salespeople should be performing on a day-to-day basis that will drive the outcome you need: closing business.
Think about it this way: Salespeople are making decisions all day about how to spend their time. Unless you help them make the right choices, you just have a bunch of busy people, and that doesn’t necessarily mean you’re going to get a bunch of sales out of it.
Check out this example from SalesCoaching1 founder Mike Smith:
“In a 20 working-day month, if you made one more call a day, how many more calls would that be in a month? Twenty. If it takes you five calls to get a presentation, how many additional presentations would that be in a month? Four. If your closing ratio is one out of four, how many additional sales would that be in a month? One. If your average commission was $450 per sale, how much additional income would that be in a year? Over $5,000.”
You see what he does? Start with a desired outcome, and break it down to the individual steps it will take to get there.
How activity-based selling works
When you take an activity-based selling approach, your sales reps are no longer overwhelmed by the enormous task of reaching a desired sales goal. They’re focused on the daily activities that will yield those results.
But figuring out how much of those activities it takes to get a desired result starts with understanding your numbers. Then you can start targeting activities to generate the numbers you need.
Here’s an example from Ashley when she worked as a district manager for Steve Nash Fitness World and Sports Club:
“If I knew that my closing ratio is 50 percent, and I wanted to sell one person a day, I’m at least going to need to put myself in front of two people. And in the fitness business, it was all about getting people to actually show up. So then you have another ratio at play, which is your show ratio. Which again – using an easy number – I know that I have to book four appointments in order to get those two people to show up,” Ashley says. “So if you start with the end in mind, then you can work backward if you know your ratios or the industry standards.”
Activity-based selling shows salespeople how to take ownership of their situation, where they can see their own path to success based on metrics, not some magic technique or amazing relationships.
Why sales leaders are embracing activity-based selling
There’s no such thing as a born salesperson, Mike says, because it’s a skill. But it can be developed if someone has the right drive, motivation and interest in being successful based on their own effort.
Ashley had a similar view, saying that activity-based selling creates a more solid framework for sales coaching.
“As a leader, I love to look at the stats and know how I can help someone be successful in their career. If I have someone who’s struggling, I can go back and actually see that they’re only getting ten leads a day. And we know that, in order to convert to two sales, we need twenty leads a day. So, I’m going to be able to coach that person effectively in order to help them see results,” she said.
With activity-based selling, you create a common language and set of operating metrics for your salespeople and managers. Not only do you have the information needed to understand how your sales team is performing right now, but you know what to do about it.
What’s more, you know how much business you’re going to close in the future based on your team’s current activity levels. That’s something you can communicate to your CEOs, shareholders and investors.