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Magic of the 3-Week Moving Average
3-Week Moving Average, a span that is 'just right'.
Moving averages are an excellent way to measure progress in pipeline building because they smooth out the day-to-day or weekly variations. Moving averages have historically been used for financial reporting with 50-day, 100-day, and 200-day moving averages as the most commonly used ones.
What is the ideal moving average for an SDR team?
We use moving averages to track our performance trends over time due to the inherent variability that accompanies pipeline generation. The three key aspects to develop a moving average are:
Measure/Metric: The measure or metric must be simple to use, not subject to gaming, and meaningful to the business. For the SDR function, the best metric to capture the volume of output is the
Number of Held Meetings and the Number of Qualified Held Meetings. Held meetings are quite easy to track, leave little room for ambiguity, and are also meaningful to the customer - in this case the salesperson. Likewise Qualified Meetings also have a binary outcome with little room for ambiguity.
Our objective in this 3-week moving average is to obtain both a volumetric measure of the outcome of the SDR's outbound efforts and a qualitative measure of the efforts. Note that the Qualified Meeting Held metric is dependent on other factors such as the customer’s situation, priorities, and the salesperson’s ability to influence the customer to take the next step.
Time Unit: Unlike a salesperson, who will be checkpointed on monthly, quarterly, and yearly metrics an SDR needs a much shorter time window. SDR action is much more fast-moving and results are achievable in a shorter time period when compared to a salesperson. The chart to the right shows that weekly numbers can be highly variable, which is why we need a moving average to know the trend.
Why the 3-Week Moving Average is Best?
There are several common choices for moving averages. 2-week moving average, a 4-week moving average, or higher. We select the timeframe such that it informs us of the general trends of meetings held and we can also take timely corrective action if the trends go wrong. Both a 2-week and 4-week moving have challenges. A 2-week moving average is susceptible to large variations making it less useful as a moving average metric. A 4-week moving average - essentially a monthly moving average, has a longer tail - i.e. each data point carries with it the influence of 3 prior weeks. Which can be quite misleading both on the upside and downside.
Our studies show that for SDRs a 3-week moving average on held meetings is the ideal metric. Yes, it is an odd number but it gives us both the smoothing effect and also does not lull the team into a false sense of achievement that a longer time span may provide. It also allows us to take quicker and more timely corrective action. Any corrective action could take a few days to a week to work its way through the system, hence a 3-week average ensures that the end-to-end lead time of observing a trend and taking corrective action is held to 4 weeks or less.
Why Not Use Metrics Such as Pipeline?
Certainly, the total pipeline built is an important metric to track. The pipeline metric adds some subjectivity as it depends on a person’s judgment of an individual on the Opportunity Amount. This we know from experience is highly subjective especially when an opportunity is just created in the system and is in its early stages. The pipeline number is also subject to much more variability. For example, even when we use preset default numbers for Opportunity Amount, there is much variability because larger accounts drive the number up, whereas smaller accounts drive the number down.
A View From the SDRs Perspective
Certainly, the total pipeline built is an important metric to track. The pipeline metric adds some subjectivity as it depends on a person’s judgment of an individual on the Opportunity Amount. This we know from experience is highly subjective especially when an opportunity is just created in the system and is in its early stages. The pipeline number is also subject to much more variability. For example, even when we use preset default numbers for Opportunity Amount, there is much variability because larger accounts drive the number up, whereas smaller accounts drive the number down.
