Key learning outcomes:

  • Learn that key performance indicators can help you to manage your business’s future success.
  • Differentiate between lagging and leading indicators.
  • Distinguish between using indicators to lead and using indicators to manage your team.
  • Recognise that key performance indicators enable you to fine tune your coaching processes.

Article:

A lot of people ask us about key performance indicators and whether they are effective for managing a sales team. The quick answer is yes. Key performance indicators are essential when managing your sales team; the trick is to ensure that you are measuring the right things and that you are using the indicators in the right way. In this article we will explain the different types of key performance indicators and show how you can use them effectively to boost your team’s performance.

What are key performance indicators?

Key performance indicators measure activities or results so you can gain an insight into how your team is performing. But more importantly, they can help you to predict future performance. To ensure you are measuring what matters, you need to ensure that you are measuring an activity that is key to the performance of the sales individual or team. For example, it may be the number of times a salesperson presents to a customer or the number of generation calls they make each day or week. It is important to only measure activities that the salesperson has control over, so it gives you a picture of their performance. To be able to use the information effectively, you want to measure activities that are indicators of future performance, rather than simply measuring what has already happened. We can break down common key performance indicators into two categories: lagging and leading indicators. They are discussed below.[wlm_ismember]

Lagging indicators

Lagging indicators measure results and outputs; they are measured after the fact. These performance indicators are generally the key focus for business owners and managers. Lagging indicators are things such as sales volumes, market share, the number of new customers gained and gross revenue. These indicators are essential to measuring your business’s progress and your sales team’s performance. However, it is important to understand that to be effective in helping your team to improve performance, lagging indicators need to be used in conjunction with leading indicators.

Leading indicators

Leading indicators are the activities or actions that happen during the sales process or on the road to a sale. In sales management, you should focus on leading indicators, as these are the activities that will improve the results and outcomes measured by the lagging indicators. Leading indicators vary from industry to industry, but will most often include such things as the number of calls a salesperson is making, how many presentations they are giving and how many leads they are converting to appointments and sales. When you start measuring these activities while working with a sales individual or team, you can then work to improve on either the number of times the activity is performed or the skills that lift conversion rates. By improving the leading indicators you will almost always improve the lagging indicators, therefore boosting the performance of your business.

Using key performance indicators

The following are some of the ways you can use key performance indicators to significantly boost the performance of your sales team.

More effective coaching – By tracking key performance indicators you are able to coach your sales team more effectively. The important thing to remember is that not everyone’s goal indicators will be the same. For example, a well-established salesperson may not need to make as many sales calls to prospective customers as a less experienced salesperson, and they may focus on calling existing or past contacts. It is essential to spend some time setting up appropriate key performance indicators for each of your salespeople.

Allowing for better decisions – By tracking your key performance indicators every week, you are able to see trends and make better decisions in real time. For example, you may see that the number of sales enquiries has declined over a number of weeks due to market conditions. If you don’t track the key performance indicators, you may not discover the drop in sales numbers until the end of the month or the quarter. By regularly tracking your key performance indicators, you can perhaps change your team’s focus on calling past prospects or customers to cover the shortfall in new enquiries or you may decide to run a promotion to boost enquiry numbers.

Knowledge is power – By knowing the sales numbers, you are able to offer your sales team some real insight into the actions and activities that get results. Too often salespeople can be busy, but that is not the same as being effective. For example, you may have a salesperson that is making the target number of sales calls, but is not getting results. This can indicate that either they are not calling the right people or they are not as effective as they could be during the sales call. By having this information you are able to create an opportunity for training and to change behaviour based on facts and data, and improvement can then be monitored closely.

Creating focus – By tracking key performance indicators, you help to focus your sales team on the activities that will help to get results. People will tend to focus on what is measured; therefore, it is essential that you spend some time researching the right indicators for your team. It may take some time to determine the indicators that bring results. For example, as part of their key performance indicators a real estate agent may drop leaflets into the houses in their area just because it is something that the office has always done. Tracking where the salesperson’s leads came from over a period of time may reveal that this activity is not effective and their time would be better spent on activities such as phone calls or creating more personalised communication.

Leading rather than managing – One of the dangers of key performance indicators is that your team may feel that you are simply checking up on them. By their nature, salespeople have a high degree of independence and do not like to be managed too closely. The key to making key performance indicators work is to show the salesperson how measurement will help to boost their performance. It is important to use the key performance indicators as a coaching tool to help the salesperson perform to their best rather than as a tool to manage their every move.

Summary

Key performance indicators, if used correctly, can enhance the performance of your sales team. The key things to remember are that you need to review the indicators regularly to allow for changes and improvements in real time, and you also need to ensure that you are tracking activities that will have an impact on results. Too often we see businesses track activities without researching how each one impacts on the end results. Setting up your key performance indicators may take some time and fine tuning, but once you start using them you will find that the information gained becomes an invaluable resource.[/wlm_ismember]

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