Monitor Sales Performance to Navigate Times of Volatility
In the world of stocks and bonds, there is a term used to define what level of uncertainty exists within a specific stock’s price. The price volatility is then compared to the rest of a portfolio, or to the entire market, to determine a score. In the world of finance, we call this the beta (β or beta coefficient) of an investment. This measure helps investors to monitor whether an investment is more or less volatile than the market. In general, a beta less than 1 indicates that an investment is less volatile than the market, while a beta more than 1 indicates that the investment is more volatile than the market.
Volatility, from a mathematical perspective, is measured as the fluctuation of the price (in the case of stocks) around the mean. This measurement is also known as the standard deviation, and can be easily performed with access to the right data.
Why Does Volatility Matter?
In the Finance world, Beta is important metric because it measures the risk of an investment that cannot be reduced by diversification. Higher risk translates into a higher expectation of returns, which will drive down prices to offset that risk.
In the world of Sales, volatility is much worse – it can impact the sales cycle, pricing negotiations, sales performance, quota attainment and overall sales team productivity.
Any sales professional who has been involved in their trade for at least a decade knows exactly the dangers of volatility. In a ten year timeframe, an economic downturn or contraction has likely occurred. What this creates is uncertainty as to whether your customers will invest in your product or service. This volatility also plays havoc on team productivity. If economic times are in decline, your co-workers know it. They know what might happen if things continue. Someone is going to lose their job.
It is during these times when economic volatility places considerable burden on those tasked with managing a sales team. Time can easily be lost – hurting productivity – doing tasks such as networking, resume updating or applying for new positions. The challenge is that during tough times, budgets are cut, so no funds are available to invest in systems or solutions to address this threat. The time to invest is now, when budget can be captured so as to best plan for times of future volatility.
How to Measure?
Finance professionals are fortunate to have a wealth of data available to them to measure what the market is doing, how it is performing and how specific stock price fluctuations are moving compared to the market. With the right data, patterns emerge that can help lead to intelligent decision support and optimized financial performance or risk management.
Sales team performance volatility can be managed in a similar way – just like a stock portfolio. Applications such as Prodoscore can provide real-time visibility into how sales professionals are spending their time. This data can be collected and then compared between team members as well as over time. Patterns will emerge that can be early indicators if a change of volatility has crept you're your sales team’s performance. This intelligence can then be acted up through intervention – and might likely give you advance notification to future performance faster than if you did not have this valuable intelligence.
Does your sale team performance consistently fluctuate from month to month? If so, then your beta score is likely quite high. This volatility can create problems for you every month. For example, it is much harder to forecast monthly sales – and whether quota will be attained – if your sales team performance swings radically from month to month.
In some industries, monthly fluctuations can be common – such as what happens in December every year, as last minute deals are negotiated, often with favorable pricing. Enterprise Industrial Software is a great example. Often a sales person’s quote attainment is achieved in the 11th or 12th month of the year, which then will drive the performance of the entire team.
Other industries have seasonality factors that drive higher sales at certain times of the year. How well do you know your industry? Do you plan your sales forecast accordingly? Here it would be good to have a firm understanding of what your sales team’s beta is, to help create more accurate forecasts.
Predictable volatility is not as harmful as unpredictable or “surprise” volatility. The former can be planned and built into your sales forecast. When a repeatable pattern emerges, no one gets nervous, as a predictable pattern can be explained.
How well can you see your sales team volatility? What tools are you using to help provide you this intelligence to then be more proactive in attaining your monthly and annual quota goals?