The best way to help your sales reps succeed is by defining and communicating clear KPIs (key performance indicators) — but this is not always as easy as it seems. Because so much sales data is now available, there’s a temptation to track too much information. This is bad because it causes you to lose focus.
Here, we lay out a KPI strategy based on the idea that when it comes to effective sales management, less can indeed be more.
How to Approach KPIs
Before getting into specific measures, here are a few guiding principles to always keep in mind:
- There are two types of factors to measure: sales activity and sales results. Results are obviously important, but activity is equally important because sales is a numbers game. It takes a certain number of sales calls made to achieve a certain number of sales closed. Even the most talented rep in the world will fall short if he or she doesn’t generate enough activity.
- Don’t let reporting interfere with performance. For instance, we will see that it is important to monitor sales calls — but it is not productive to ask the rep for a five-page report detailing what happened on each call. Micromanagement wastes valuable sales time, ruin morale and produces more information than you have time to evaluate.
- Focus on improvement. Reps have different abilities, experiences, and learning styles. If a rep starts slowly but shows steady progress, success will eventually come. On the flip side, a fast starter may plateau early instead of keep pushing to reach a higher level. Good performance measures get the absolute best out of every salesperson.
Here is what to watch for in terms of sales activity. These activities directly relate to sales made:
- New customer sales calls. A call should be defined as an initial sales effort made to a new customer. It could be over the phone, face to face, and even by text/email. It all depends on what’s common in your industry and what gets results.
- New sales call to existing customers. Selling in-depth is critically important in many businesses. Great sales reps are always trying to sell something new.
- Quotes or proposals generated. Careful monitoring of these provides a wealth of valuable information — allowing you to review pricing; persuasiveness of the document; develop at least a rough sales forecast; and track progress in close rates and overall performance relative to other salespeople on the team.
That’s it. Do a great job managing these KPIs, and reps will know exactly what is expected: Make a lot of new sales calls, sell in-depth, and get to the proposal stage as quickly and often as possible.
When you and the sales team have mastered these three KPIs, you can refine them or add others, always being careful not to dilute focus and spread sales energy too thin.
To rephrase what was noted earlier, don’t let an ocean of sales data drown you. The real art of results-oriented KPIs is the same as what applies to activity KPIs: simplicity and relentless focus.
- Sales to new customers. This correlates to the first activity KPI. If the rep is making a ton of calls but showing little or no growth in sales, it probably indicates a problem with skills. Conversely, if a rep is making relatively few calls but produces exceptional results, you have a star on your hands who just needs to work harder or more efficiently.
- Sales to existing customers. This correlates to the second activity KPI, and the same evaluation logic applies.
That’s it! Again, as you and the sales team gain confidence in these KPIs, you can fine-tune by adding other KPIs to the mix.
Few KPIs Yield Many Insights
This formula for KPIs may be simple, but it’s deceptively simple. You will gain a tremendous number of insights from the above five metrics. For instance:
- You will see that some reps learn more quickly than others. This helps you know how and when to offer each rep further training in products and sales skills. Without understanding individual learning ability, you’ll throw too much at some reps and confuse them, and hold back superstars ready to absorb more knowledge.
- You will see that some reps are great at opening doors, others are great at cultivating deep customer relationships, and a rare few are great at doing both. These insights empower you to effectively bring specialization to your sales team, allowing reps to excel in their capabilities.
- Especially by carefully reviewing quotes and proposals, you will get an excellent handle on what products/services each rep likes to sell, sells most effectively, and sells most quickly. A knowledge of these things, in turn, enables you to craft better sales promotions, set prices, understand the various sales cycles, and identify new products/services with the most potential.
Every Business Is Different
Simple is good when it comes to KPIs, but measuring sales performance is never a one-size-fits-all affair. Depending on the nature of your business, you’ll want to emphasize very different or slightly different KPIs. Here are a few examples of variables that should influence your KPI choices:
- If you are in a business where sales reps do their own pricing, you need to carefully monitor profit margins in addition to sales revenue, or perhaps even instead of monitoring sales revenue.
- If your business is structured such that sales reps work on new customers only rather than doing that along with servicing existing customers, you’ll obviously want to replace the monitoring of new sales to existing customers with something else. In companies so structured, it is often important to monitor the quality and quantity of leads being generated by the sales and/or marketing team.
- In highly competitive businesses where a high degree of customer churn exists, it is critically important to monitor lost customers and customers whose sales are declining. This not only helps you coach sales reps but enables you to identify customers in jeopardy quickly, while there is still time to do something about it.
As always in small and midsize businesses, let common sense and industry experience be your guides. If a KPI feels important to you, it probably is. If your salespeople believe you are tracking the right metrics, that’s another sure sign you are on the right track.
Author bio: Grant Clarke is Senior Vice President of Global Sales Operations and Pre-Sales Consulting at ServiceSource. His experience and knowledge uniquely position Clarke to scale his capabilities to ensure ServiceSource is focused on improving the customer journey for the company’s clients.