The role of the sales director can, at times, be an unenviable one. Caught between the board’s financial forecast expectations and the need to deliver on ever-increasing targets while simultaneously attempting to coach, encourage performance, and manage the sales team can become dreadful. 

Sales Forecasts are Key for Developing Accurate Expectations

Forecasts, to some degree, are relatively straightforward but it’s something essential for the business and, therefore, it’s something the sales director is absolutely tied to. Sales forecasts reflect expectations as to when money will be coming into the business and where it’ll be coming from.

They are usually reviewed monthly, but forecasts will determine how a business needs to be resourced. Much spins on the need for forecasts to be accurate and known due to the fact that if either unnecessary or insufficient resources are provided, then this could lead to forecasts not being established at a reachable objective.

In brief, forecasts are an underlying revenue from past statistics and from new business, which is guaranteed (or highly likely) to happen again.

In some sales teams, there may be 2 sets of forecasts; one is the ‘nailed on’ forecast, i.e. it will happen. However, sometimes businesses will also do an assessment of where other deals will be taking place along the pipeline. If there is enough confidence in both the salesperson and the customer being able to conclude and finance an impending deal this month, then some or all of that revenue may be called into the forecast – sometimes known as ‘upside.’ This approach, however, is less of science and more of an art form, practiced by the strong, the brave, and the confident.

Make Targets Ambitious, Yet Realistic

Targets are fixed and usually planned for a year in advance, with milestones measured along the way. Most sales leaders will aim to set a target, which exceeds the forecast, in the knowledge that as long as the team doesn’t fall too far short of the target, the sales director will still be able to deliver on the forecast.

The goal of course is to recognize what the gap is at various points during the year to achieve the target. If the monthly forecast is coming in below target, then the sales director has to find a way to help the team bridge the gap. In brief, a sales director is required to forecast to the board against target.

Sales Pipelines

Pipeline helps to inform forecasts. At its best, the pipeline is an accurate representation of qualified new business opportunities. By applying known conversion rates to the sales team’s pipeline activities, a sales director can accurately forecast sales, revenue, and profit for that month.

At its worst, however, the pipeline is calculated by sales directors based on ‘leads’ entered into the company’s CRM system by the sales team. The challenge here is that, invariably, what constitutes a high-value converting lead can differ between the viewpoint of the sales director and the salesperson. If the pipeline truly informs forecast, then this can be a recipe for disaster.  

The Sales Director’s Responsibility

The responsibility of the sales director is to ensure that forecasts are met. A forecast is generally an absolute – and any sales director who fails to meet or exceed forecast is unlikely to remain in the job for long.

A sales director needs to ensure that at least 3 things are happening to ensure that sales forecasts are achieved:

1. Competency: Ensure that salespeople are provided with the right training, coaching, and support to do their job to their full potential. The sales director must also be able to recognize the varying skill levels of each salesperson and how those variables may impact the team’s ability to reach their goals.
2. Talent acquisition: Sales directors should continually develop a talent pool of high-performing salespeople who can benefit the team’s progress towards achieving the common sales objectives.
3. Performance management: It’s crucial for sales directors to make sure that each team member’s performance is optimized during the year, identifying and recognizing star performers, and helping coach those that need help in achieving their individual goals.

Let’s consider each of these topics in slightly more detail.

1. Competency

To understand and encourage competency, we must comprehend the psychology behind the 4 stages of competence. When we learn a new skill or behavior, such as learning to drive a car, almost all of us begin the journey as an unconscious incompetent – we don’t know what we don’t know. As our skills develop, we ultimately aim to achieve a level of unconscious competency, where our newfound skill has become so ingrained that we can drive a car and change gears without giving this a second thought.

In a sales team, you will undoubtedly have a mix of skill levels. You may have employed a junior salesperson, fresh out of college, who has never been exposed to a sales process before (unconscious incompetent) and at the other end of the scale, your top salesperson can close more deals in her sleep (unconscious competent) than the rest of the team put together.

A sales director who does not consider the mix of abilities within their sales team is likely to find achieving the target a challenge, especially if the same performance targets are being applied across every individual in the team.

Without the use of a skills matrix, which clearly identifies the skill variables within the sales team, targeting and forecasting can become somewhat of a lottery. How to apply, effectively, the use of a skills matrix, will be just one of the topics we’ll be sharing a more in-depth article on in the coming weeks.   

2. Talent acquisition

Imagine the following scenario: out of nowhere, your top salesperson announces he’s leaving, having been offered an unmissable opportunity at another company. You’re now faced with diverting your attention toward the hunt for his replacement.

Achieving sales targets is not just about the team you have now, it’s about the team you will have in the future. How are you preparing your team for that future? Do you have a pipeline of possible candidates who could almost immediately step into the shoes of your departing salesperson?

As a sales leader, you must continually be on the lookout for new talent. This doesn’t just mean being prepared when a suitable candidate presents themselves to you, it’s about having a strategy – perhaps one that involves using LinkedIn to build a network pipeline of potential candidates.

3. Performance Management

Setting an acceptable performance standard is important for all stakeholders involved. It’s not all about results (though this is undoubtedly an important consideration), but about areas that provide an assessment as to how well a salesperson is doing at various stages of their career with the organization.

Setting an Appropriate Standard

It is unacceptable to tell a salesperson that they are not performing without appropriate evidence. It is far preferable for a salesperson to be able to ‘rate’ themselves using a team-wide acceptable solution – and ideally one that is easy to use and understand.

Wanting a team to be world-class is an admirable goal – but what does that even mean? Setting an expectation that an acceptable results grade (you’re doing your job well) of ‘5,’ which means you are 105-110% of the year-to-date target, is much better.

At the end, how salespeople will be rated is up to the sales director. Having said that, we believe the key areas are: Results, Pipeline, Activity and Competency

Want a simple to use way of measuring a sales team’s performance?

Try this approach using Excel and compile a quarterly/monthly master sheet including all team members so you can see who is above or below the acceptable line.

Having a competent sales team, developing a future talent pool, and managing the sales team’s performance, all while being responsive to the board’s sales forecasts can, at times, seem like you’re stuck between a rock and a hard place – and being constantly stretched between the two.

This article has been reprinted with permission from Steve Phillip’s Linkedin page.