Determining your key performance indicators (KPIs) can be one of the most important things you do as a sales leader. These are the operating metrics to run your sales organization.
But before we jump into defining your sales KPIs, we have to make an important distinction between leading and lagging KPIs.
Leading vs. Lagging KPIs
Lagging KPIs include revenue, close rate, deal size and sales cycle length. These tell you what has already happened and how well you’re doing. Leading KPIs, on the other hand, are controllable behaviors that you believe will lead to the desired outcome.
For example deal size is a lagging indicator. It’s not a controllable behavior.
But there are leading indicators that would improve the likelihood of increasing deal size, like VP-level conversations, ROI discussions and prospecting into larger companies. If increasing your deal size is a key company strategy this year, then you’ll want to consider establishing activity metrics that align with the ones referenced above.
Easy enough, right? Let’s get started on finding the right sales KPIs for your sales team.
5 steps to identify Sales KPIs
1. Define your sales organizational structure
You can’t define a single set of sales KPIs for your entire organization as they’ll be different for each role. So the first step is to draw out a rough org chart for the different seller roles within your sales organization.
Do this for your own team so you understand where everyone fits within the sales process.
2. Develop your own hypothesis
As the person leading this initiative to define your company’s sales KPIs — whether you’re a VP of sales, front-line sales manager or sales operations person — you should create your own hypothesis for the right metrics and activities to measure your sales team by. You’ll mostly keep this to yourself at first, but it helps to take a shot at it so you have a sense of what you’re going for.
List out your ideas for each of the seller roles. Depending on your organizational structure, industry, and other factors, you will develop a unique set of sales KPIs for the different teams within your company (e.g. Sales Development, Inside Sales, Field Sales, and Account Management).
For example, you could hypothesize that the lagging indicators for your inside sales team are closed deals, deal size, and close rate, while the leading indicators are talk time, VP-level conversations and ROI discussions.
Remember, a hypothesis is just an educated guess. You don’t need to spend an enormous amount of time on this. Just start somewhere, because the exercise will put you in the right mindset for the rest of this process.
3. Interview team members
Now that you have your own hypothesis, it’s time to see what the rest of your organization thinks.
Be sure to explain to your team members that you’re really trying to define the right sales KPIs for the organization, and that this will be a combination of leading indicators and lagging indicators. Getting people involved in this process creates intrigue, and ultimately, buy-in because they participated in the process. Pull together one or two of each of the following people to conduct a one-on-one interview.
- 2 Top-performing salespeople
- 2 Middle-performing salespeople
- 2 Low-performing salespeople
- 2 to 3 Front-line sales managers
- 2 to 3 Executives (such as the CEO or COO and the VP of Sales / CRO)
For your top-performing sales reps, ask them which activities they’re doing on a day-to-day basis that they think makes them so successful. Note that top performers tend to do things naturally and don’t always really know what they’re doing, so you’ll need to probe a bit here. Also, ask for their perspective on what they think other salespeople on the team aren’t doing enough of that would help them be more successful.
Interview your middle performers on what activities they think are most important that could help them get more sales. What do they wish they could do more often, but don’t because of other distractions. Alternatively, you can ask what they see top-performing reps do that they have struggled with.
Low performers can also help this process by having them identify what they think they need to be more successful. As with middle performers, asking these reps what they think top performers spend their time doing or do differently than they can yield some insights.
For your front-line sales managers, asking what they think the most important things their salespeople should be doing (besides closing deals) is a good place to start. You can also ask more specific questions, like what activities they think middle or low performers should be focusing more on.
Finally, interview a few of the executives in your organization who either have experience with sales or are familiar with your sales organization. Here you can focus on some higher-level questions, such as what the behaviors they think salespeople in highly productive organizations focus on. Another great question here is to ask what kind of metrics they’d like to be able to show to board members or investors.
4. Identify leading vs. lagging sales KPIs
As you go through your interviews, make a list of all the suggestions. You might end up with 20+ items on your list or just 10, but take each one and sort it into one of our two groups: leading indicators and lagging indicators.
You might find that your initial hypothesis is validated, or you might learn something important you didn’t think about before.
Use your judgment based on your hypothesis and interviews to select 3-4 leading indicators and 2-3 lagging indicators to focus on. Selecting too many measurements will result in a lack of focus. Don’t overwhelm people with numbers and information — this process is supposed to help them prioritize and succeed.
Bring back a few of the people you interviewed before and present them with your refined list of measurements, as well as the ones you put to the side in case there are some strong reasons to re-prioritize. If you get agreement from members of each team that the KPIs align with your sales process and current initiatives, then it’s time to roll out the first version.
5. Roll out, measure, repeat
Once armed with the KPIs to measure your sales organization, you’ll probably be excited to get this moving as quickly as possible. But keep in mind that this could be a big change for certain team members, so keep a pulse on your individual teams and check back throughout the implementation process. Software solutions like LevelEleven can help you streamline this entire process and manage all of your KPIs within your CRM.
Once your KPIs are rolled out, be sure to track their progress carefully. If you find that the leading and lagging indicators you chose are not making an impact on your sales organization, then it might be time to go back to the drawing board and try a few new ones (don’t make this decision hastily as frequent changes can result in a lack of focus).
Additional Resources:
Register for “Identify the Right Sales KPIs for Q3”
Read the 2017 KPI Report
Request a demo of LevelEleven
Happy Selling!
