Sales Key Performance Indicators (KPIs) can make or break your sales results. KPIs are the vital navigation instruments used by managers and leaders to understand whether they are on course to success or not. The right set of KPIs will shine light on performance and highlight areas that need attention.
Here are five common mistakes when developing sales KPIs:
Focusing only on financial KPIs
Sales are all about reaching financial KPIs that the company has budgeted for. But it is a mistake to focus purely on financial KPIs to drive sales, as these are outcome focused. If you want to influence sales outcomes you need to measure the precursors (inputs) to the sale. These are behavioural KPIs, like the number of phone calls, meetings, proposals etc. When managers focus on holding salespeople accountable on the right KPIs, sales will grow!
Too many KPIs
Have you heard of the phrase ‘paralysis by analysis’? The issues that come from measuring too many sales KPIs are just that! It is very confusing and hard to hold people accountable to what really matters. If you want to hold your team accountable, less is best. Try not to focus on any more than three KPIs. This sounds easy, but it can be difficult to narrow it down to three that really matter.
For example, a recruitment company that we worked with had an overwhelming dashboard. They measured everything possible, but failed to hold their recruitment consultants accountable on what really mattered. When push came to shove, what really mattered were three KPIs:
- Number of job orders to fill
- Candidate interviews with client meetings
- Sales revenue month-to-date
This increased the revenue of the company massively because it focused the recruiters on the right behaviours. At the end of the day, nothing really matters unless you have job orders, and candidates in front of the clients.
Measuring activity without measuring effectiveness
An easy trap to fall into is measuring the activity without considering effectiveness. On a recent client visit, they had a salesperson from a supplier call on them just prior to my arrival. My client took pride in pointing out that the salesperson that just left turns up every month, does not ask any questions, has a general chit chat, does not add any value, and is in and out of the office within minutes. He then proceeds to sit in his car and tick off his call reports!
Do you think his company has the right KPIs in place? The salesperson is obviously measured by the activity on the call report, but not on the effectiveness of the call. Never, ever make a call without an objective!
Not setting a pass or fail criteria
If you want to create good behaviour within your sales team, they not only need to know the right KPIs to achieve, but they also need to know what a pass and a fail look like.
Having a traffic light system is a great visual way to achieve this. For example, the recruitment company measured job orders per month per recruitment consultant:
Red = Off track (<5 job orders)
Yellow = Needs help (5–7 job orders)
Green = On track (>7 job orders)
Lack of visibility
Visible dashboards in sales are often referred to as the ‘wall of fame or shame’, and are a good way of holding salespeople accountable. For the most part, salespeople are a competitive bunch and they don’t like losing, so this acts as a system of self-motivation.
Furthermore, there is nothing better for the competitive salesperson than to know that they are smashing their results, their peers and they are all green, because green is what makes them money!
As for red, it is like a red card in sports. They don’t want to keep playing if they are getting reds, so they either shape up or ship out (red-carded).
Do you have a dashboard which effectively drives your sales?
- What are the key milestones in your sales process that influence the sale?
- What is the right activity which drives sales results?
- If you had to measure one thing, what would it be?
- How can you make your sales activity more visible?
- What improvements could you foresee if you had this in place?
Maybe it’s time you developed an effective dashboard to help you smash your sales targets.