The Most Important Chart for Managing the Pipeline: The Opportunity Histogram

In my last post, I made the case that the simplest, most intuitive metric for understanding whether you have too much, too little, or just the right amount of pipeline is opportunities/salesrep, calculated for both the current-quarter and the all-quarters pipeline.

This post builds upon the prior one by examining potential (and usually inevitable) problems with pipeline distribution.  If the problem uncovered by the first post was that “ARR hides weak opportunity count,” the problem uncovered by this post is that “averages hide uneven distributions.”

In reality, the pipeline is almost never evenly distributed:

  • Despite the salesops team’s best effort to create equal territories at the start of the year, opportunities invariably end up unevenly distributed across them.
  • If you view marketing as dropping leads from airplanes, the odds that those leads fall evenly over your territories is zero.  In some cases, marketing can control where leads land (e.g., a local CFO event in Chicago), but in most cases they cannot.
  • Tenured salesreps (who have had more time to develop their territories) usually have more opportunities than junior ones.
  • Warm territories tend to have more opportunities than cold ones [1].
  • High-activity salesreps [2] tend to have more opportunities than their more average-activity counterparts.

The result is that even my favorite pipeline metric, opportunities/salesrep, can be misleading because it’s a mathematical average and a single average can be produced by very different distributions.  So, much as I generally prefer tables of numbers to charts, here’s a case where we’re going to need a chart to get a look at the distribution.

Here’s an example:

oppty histo

Let’s say this company thinks its salesreps need 7 this-quarter and 16 all-quarters opportunities in order to be successful.  The averages here, shown by the blue and orange dotted lines respectively, say they’re in great shape — the average this-quarter opportunities/salesrep is 7.1 and the average all-quarters is 16.6.

But behind that lies a terrible distribution:  only 4 salesreps (reps 2, 7, 10, and 13) have more than 7 opportunities in the current quarter.  The other 11 are all starving to various degrees with 5 reps having 4 or fewer opportunities.

The all-quarters pipeline is somewhat healthier.  There are 8 reps above the target of 16, but nevertheless, certain reps are starving on both a this-quarter and all-quarters basis (reps 4, 11, 12, and 14) and have little chance at either short- or mid-term success.

Now that we can use this chart to highlight this problem, let’s examine the three ways to solve it.

  • Generate more opportunities, ideally in a super-targeted way to help the starving reps without further burying the loaded reps.  Sales loves to ask for this solution.  In practice, it’s hard to execute and inherently phase-lagged.
  • Reduce the number of reps.  If reps 4, 11, and 12 have been at the company for a long time and continuously struggled to hit their numbers, we can “Lord of the Flies” them, and reassign their opportunities to some of the surviving reps.  The problem here is that you’re reducing sales quota capacity — it’s a potentially good short-term fix that hurts long-term growth [3].
  • Reallocate opportunities from loaded reps to starving reps.  Sales management usually loathes this “Robin Hood” approach because there are few things more difficult than taking an opportunity from a sales rep.  (Think:  you can pry it from my cold dead fingers.)  This is a real problem because it is the best solution to the problem [4] — there is no way that reps 7 and 13 can actively service all their opportunities and the company is likely to be losing deals it could have won because of it [5].

You can download the spreadsheet for this post, here.

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Notes

[1] The distinction here is whether the territory has been continuously and actively covered (warm) vs. either totally uncovered or partially covered by another rep who did not actively manage it (cold).

[2] Yes, David C., if you’re reading this while doing a demo from the back seat of your car that someone else is driving on the NJ Turnpike, you are the archtype!

[3] It’s also a bad solution if they are proven salesreps simply caught in a pipeline crunch, perhaps after having had a blow-out result in the prior quarter.

[4] Other solutions include negotiating with the reps — e.g., “if you hand off these four opportunities I’ll uplift the commissions twenty percent and you’ll split it with salesrep I assign them to — 60% of something is a lot more than 100% of zero, which is what you’ll get if you can’t put enough time into the deal.”

[5] Better yet, in anticipation of the inevitable opportunity distribution problem, sales management can and should leave fallow (i.e., unmapped) territories, so they can do dynamic rebalancing as opportunities are created without enduring the painful “taking” of an opportunity from a salesrep who thinks they own it.

One response to “The Most Important Chart for Managing the Pipeline: The Opportunity Histogram

  1. I agree with the histogram shown, however, I also like a companion that shows dollars in pipeline in absolute dollars and dollars weighted by pipeline stage.

    With just the opportunities you can be mislead by reps who chose only the small, easy to close deals and aren’t pursuing anything big.

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