Today’s post is by Nikolaus Kimla, CEO of Pipeliner Sales, Inc., as well as the author of some 50 books on sales management and sales methodology. Find him on LinkedIn, or email him directly at [email protected]. You can also join him at the Sales 2.0 Leadership Conference in Philadelphia on November 16.
Sales management is often conducted using lagging indicators – KPIs (Key Performance Indicators) that show what has already happened, such as:
- Number of units sold
- Gross margin
- Number of different products sold
We definitely need these in order to see where we’ve been and how we’ve done. But managing only with lagging indicators means you, too, are going to be lagging. Why? By the time lagging indicators become clear, it is too late to change anything.
To look into the future, we need to be able to tell how our current activities are impacting those final figures.
Now let’s take a look at the other kind of KPI, called leading indicators. Leading indicators serve as a somewhat reliable index of how our lagging indicators are going to turn out, and consist of factors that can be monitored on a day-to-day basis, such as:
- Leads created
- Leads converted to opportunities
- Sales rep closing ratio
- Percentage of opportunities through each sales process stage
A full, usable, dynamic picture of your operation comes about only through the combination of leading and lagging indicators. Only this combination allows you to catch errors and make changes well before your lagging indicators come into effect.
A skillful combination uses leading indicators in such a way that they connect directly with potential lagging indicators – allowing you to clearly see how they will appear if you proceed as planned. For example, if you add up the value of your opportunities in your pipeline, the percentage chances of their making it through, the ranking of each deal, and other leading factors, you see that – if all goes according to plan – you’ll have $1.5 million for the quarter.
If you add up all your leading indicators and see that you’re falling short of your target, you then have time to do something about it. For example:
- Get more leads into the pipeline.
- Take steps to raise lead-to-opportunity conversion rates.
- Coach and mentor your reps to raise closing ratios.
- Monitor your sales process to makes sure it is efficient.
Unless you assign one or more sales admin staff full time to the task (which would certainly not be cost effective), you’re going to have a tough time keeping your leading indicators updated. It’s best – in fact, it’s vital – that you have an automated solution that fully incorporates your leading and lagging indicators, and allows you to watch them in real time. It’s obviously best if this solution is also your CRM solution, so everything is in one place.
So look over your sales operations. Do you have leading indicators that clearly show where your sales are headed and how you’ll get there, along with lagging indicators that show where you’ve been? Make sure these are both in place, and fully incorporated into your sales organization and automation, so you always know where you’re going.