Looking Beyond Sales Productivity in Planning
I shared a video where I talked about the risks of using your average sales productivity in your planning. The message was that sales productivity is an outcome, not an assumption, and you need to understand what drives your productivity.
What should you analyze to get a better understanding? I mentioned two areas as examples, sales tenure and territories, which I'll cover in this post.
One of the most insightful cuts of your productivity data is by tenure. Especially for more mature products and companies, sales people just get better with time. Look at your early ramping reps, your ramped reps, and your long term reps, those with over 2 years tenure. Tenure is important to understand if you plan to invest in sales capacity to drive growth. Back to the point that productivity is an outcome, if your math for future bookings is sales capacity times average productivity, you're creating a problem if your new sellers are not as productive as the average.
Let's go back to Scenario 1 and the high concentration of productivity in the top quartile. Let's suppose that 80% of that top quartile has more than two years tenure.
It looks like you have a long productivity ramp, so what's causing that? Is it an awareness issue, and it takes a long time to generate demand in accounts? Look at their deal cycle times and compare. Does it take your sellers a long time to figure out how to win? Look at their win rates and conversion rates over time. Are those long tenured sellers holding on to your best expand customers?
Back to the main point, you need to understand what is driving this outcome to make the right assumptions on your growth.
Let's look at Scenario 2. What if 50% of that top quartile is long tenured, and what if 30% of the second quartile are actually ramping reps who are overperforming?
It might say that you are getting tail winds in the market, and it is a good time to invest in sales capacity. If you have a good portion of your capacity coming out of their ramp, you may feel more confident assuming an uptick in productivity and growth. But you may also want to look at the next factor, which is territories.
How you allocate your capacity to your market can be a big factor in determining your future sales productivity. If you are creating new territories in emerging market areas, it's usually not going to be as productive as more established pockets. Scenario 1 might have 70% of its top quartile performers in its core market. That can be along many dimensions, by product, by geo, by segment, by industry, depending on your business. Maybe they need to concentrate more capacity in their core instead of covering new market areas.
In Scenario 2, it may be that the gradual uptick in productivity is coming from territories that are turning a corner. Maybe EMEA is picking up, or a specific vertical, or maybe you are hitting your stride in mid-market. Looking at that data will help you decide on whether to double down in that area, or use that momentum to explore other areas.
It's another illustration that sales productivity is an outcome, not an assumption.
One bonus topic I'd like to touch on is deal sizes. If your sales motion delivers high NNACV deals, it can throw off your productivity data, so you will want to cross-reference your productivity with your deal size data. The distribution curve matters here as well, so take a look at each deal in the quarter. If you see something like the uptick in Q4 for Scenario 1, chances are there was one or more big deal that threw off the numbers. So then you need to judge how consistent you are in landing those deals. Big deal hunting can help a lot, especially in the 20-50M bookings range, but be careful: some day, the music will stop.
There may be other nuances in what drives your productivity. It could be lead sources or relate to your channel and partner strategies. It could relate to competitive pressures. There may be pricing or packaging issues. I gave the examples here to illustrate how to break down your productivity average and make more informed decisions on how to forecast growth and where to invest.
Connect with Jason Ambrose on LinkedIn.