How to establish KPIs and sales systems to measure against.
As the founder of modern management Peter Drucker once said, “What gets measured gets improved.”
Without a set of sales KPIs and an effective system to track and monitor them, a sales team is operating without knowing where the goal posts are.
It’s a recipe for inconsistent results. The lack of clarity affects all levels of a sales team too. Individuals have no focus, managers can’t see if their team is performing (or not), and leaders lose the ability to forecast accurately.
“If you’re not measuring your KPIs, you don’t know if you’re operating an effective sales team,” says Paul O’Donohue, SalesStar’s Founder and CEO. “What gets measured gets improved.”
Every business is different. There’s no one set of KPIs that works for everyone. However, there are a few rules that companies can use to help them select the right ones for them. Don’t focus only on lagging indicators Lagging indicators consists of output or outcome metrics, such as month to date revenue, profit, and deals won, labour cost per unit (no); essentially anything that is a result.
“Focusing only on lagging indicators is where most companies get it wrong,” says Paul. “They are important, but they are historic. It’s like getting a D on a graded paper. You cannot go back and change it; you can only learn from it for next time.”
While lagging KPIs are necessary, they have some limitations. It’s why they are often paired with leading indicators, which are behavioural measures. “Leading indicators can be the number of phone calls, the number of referrals, the number of meetings, the number of proposals presented,” says Paul. “They are the things we can influence now to change the final outcome. These are what we focus on.” Tip: Reverse engineer your sales process. If you’ve got an effective sales process in place, work the numbers backwards to produce a set of meaningful KPIs.
For example: If you’ve got a 50 per cent conversion ratio from presenting, then how many proposals do you need to have? How many proposals does each salesperson need to present per week? Therefore, tracking number of proposals per week could be a handy leading indicator for your sales team.
While it’s tempting to track everything, it can lead to confusion. The more KPIs you have, the more difficult it is for your staff to know which to prioritise.
“If you’ve got 12 KPIs, which one is the most important one?” Paul posits.
When setting KPIs, keep it simple. Less often leads to more. SalesStar, for example, focuses primarily on four KPIs:
1. Number of discovery meetings this week.
2. Number of proposals presented this week.
3. Number of discovery meetings booked for the week ahead.
4. Number of proposals booked for the week ahead.
Businesses can use one or many sales systems to help track and measure KPIs. However, the biggest error companies make is choosing systems that don’t replicate their sales process. “You need to have really good systems in place to measure those KPIs,” Paul says. “The most effective are those that allow salespeople, managers and CEOs to see deals going through the milestones of their sales process.”
Having a dashboarded system not only helps you track KPIs and deals, but helps managers pick up on non-performers. Most of all, it helps business leaders forecast. “Without an effective system(s) you can’t see what’s in the pipeline to close in the next week or month. It causes a huge amount of stress,” Paul says.
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