One of the beautiful things about the game of baseball is the fact that stats are kept on EVERYTHING. Think about it, how often has the casual fan heard an announcer in the World Series say, “He leads the American League in two out RBIs after the seventh inning in games since the All-Star break.” Got a question about baseball: there’s a stat for that. This wealth of information has led many to question the value of traditional statistics like wins and losses for pitchers, or even ERA. Similarly, in this business we keep track of all types of statistics: Percent to quota and productivity per rep come immediately to mind. But do we really focus on the correct performance statistics in our business?
What is this fascination with statistics?
While baseball is in its purest form a game, it really is a business. Both teams and players use statistics to measure players’ worth. A player’s worth equates to the value of a contract they can negotiate. To ownership the calculations are a bit more complex in that they see statistics as a tool to determine which players can deliver the best performance balanced against the amount of payroll they have to expend to get that player. For those who have not read the book or seen the movie, Moneyball goes into good detail on how teams use a stat called WAR (Wins Above Replacement) to establish one statistic for player value.
What does all this have to do with copiers?
Well, just like an MLB team, a dealership has a certain amount of payroll to expend. And just like an MLB team, if you are using the same old stats to gage performance you are probably getting it wrong.
What is the matter with the stats we have always used?
The simple stats commonly used fail miserably to account for the general lack of uniformity in the sport. In short, not all ERAs are created equal. While the dimensions of the infield and pitchers mound are consistent, all other dimensions of the game are not. “Ballpark Factors” such as outfield fence depth, foul territory, prevailing winds, altitude and humidity, among many other things, play a role in inflating or deflating the stats depending on where the individual plays the majority of his games. In our business you can equate ballpark factors with a rep’s territory: not all are created equal but the territory has a significant affect in determining success or failure. If you are determining your reps value solely on performance vs. plan you may be seriously missing the boat. What you should be focused to is what the rep’s performance is compared to the opportunity they have been assigned.
The failing of % to quota
We have grown comfortable with equating the value of a rep to their achievement of quota. See the 125% club etc. Here is my question: how was that quota established? Quotas should be established in a manner that allows for a true evaluation of performance. For example, rep one sells $1 million on a quota of $900K (111% of plan). Rep two sells $300K against a quota of $500K (60% of quota). Which rep is more valuable? The correct answer is that it is hard to say. You may think that you should fire the rep at 60%. But would you change your answer if I told you that rep two only had upgrade potential in her territory of $150K? That would mean that the rep covered the opportunity from the current customers and then sold $150K to new accounts. This rep grew the territory and some would have considered firing her. Lets look at the first rep that sold a $1 million dollars. What if I told you that rep had upgrade opportunity of $1.5 million in his territory? We just sent him on the president’s club trip and he lost a half a million in current account business and sold nothing to new accounts. Which rep has the higher value to the company now?
It is impossible to judge the performance of one rep against another based solely on % of quota or even revenue because of the inconsistency in the potential of the territories. However, if you assign quotas based on the territory’s potential and you use the same methodology for all reps across the enterprise then % to quota becomes relevant. Similarly MLB statisticians realize the inherent inconsistencies in ERA due to ballpark factors. As a result, they created a stat called ERA+, which takes these factors into account and gives comparability to the statistic.
The cost of poor decision-making
In baseball, the teams that make poor personnel decisions are tied to long-term multi-million dollar contracts that can cost both production as well as the opportunity to sign better talent. In the imaging world making poor personnel decisions carries a high cost too. Just think of the reps to whom you trust your most important asset—your customer base. If you cannot adequately gauge the value of the players on your team you may be overpaying underperformers while the good ones are getting away. You can measure the cost in lost customer base and a shrinking service annuity.
Baseball has the equation figured out
Wins above replacement is an interesting stat that combines other statistics to put a numerical value on one question: if a player was lost to injury or trade, how many fewer games would the team win over the course of a year? More MLB clubs are making personnel decisions based on WAR. When player contracts are routinely counted in the hundreds of millions, poor decisions can cost clubs dearly. Have you determined what your WAR stat is for your business?
Don’t miss our upcoming Strategic Sales Management Training on May 6th and 7th in Philadelphia! Click here for more information.
