Sales KPIs can make, or break, your sales results and here are five common mistakes when developing sales KPIs.
- Focusing on just financial KPIs
- Too many KPIs
- Measuring activity without measuring effectiveness
- Not setting a pass or fail criteria
- Lack of visibility
1. Focusing on just financial KPIs
Sales is all about reaching financial KPI’s that the company has budgeted for. But it is a mistake to purely focus on financial KPI’s to drive sales as these are outcome focused. If you want to influence sales outcomes you need to measure the precursor (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!
2. Too many KPIs
Have you heard of the phrase “paralysis by analysis”? The issues when measuring too many sales KPIs is 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, which 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 comes to shove what really mattered was just three KPIs. 1. Number of Job Orders to Fill, 2. Candidate interviews with Client meetings, and 3. Sales revenue MTD. This massively increased the revenue of the company because it focused the recruiters on the right behaviour, because at the end of the day nothing really matters unless you have job orders, and candidates in front of the clients.
3. Measuring activity without measuring effectiveness
An easy trap to fall into is to measure the activity without 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 who 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 sits in his car to tick off his call reports! Do you think his company has the right KPI’s in place? The salesperson is obviously measured by the activity on the call report but not the effectiveness of the call. Never, ever make a call with out an objective!
4. Not setting a pass or fail criteria
If you want to manage the right behaviour with your sales team, they not only need to know the right KPIs that they need to achieve, but they also need to know what a pass and or a fail looks like.
Having a traffic light system is a great visual to achieve this:
Red = Off Track
Yellow = Needs Help
Green = On track
For example, the recruitment company measured Job Orders per recruitment consultant:
Green = > 8 job orders (On track)
Yellow = 5 – 7 (Needs Help)
Red = < 5 job orders (Off track)
5. No visibility
Visible dashboards in sales are often referred to as “Wall of fame or shame” and are a good way of holding salespeople accountable to the right behaviour. 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 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 visible?
- What improvements could you foresee if you had this in place?
If you would like to learn more as how we can help develop you an effective dashboard to smash your sales targets contact SalesStar.