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 two measurements: metrics and activities.
A metric is a lagging indicator. Some examples include revenue, close rate, deal size and sales cycle length. These tell you what has already happened and how well you’re doing. Activities, on the other hand, are leading indicators which are controllable behaviors that you believe will lead to the desired outcome.
For example Deal size is a metric. It’s not a controllable behavior.
But there are controllable behaviors that would improve the likelihood of increasing that deal size metric, 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 such as those referenced above.
Easy enough, right? Let’s get started on finding the right sales KPIs for your sales team.
5 Steps for Identifying Sales KPIs
1. Define sales organizational structure
You can’t set a single set of KPIs for your entire sales organization as they’ll be different for each part of your team. So the first step is to draw out a rough organizational chart for the different seller positions within your sales organization.
Below is an example:
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. So list out your ideas for each of the seller positions. In the sample org chart above, you would develop a unique set of metrics and activities for the Sales Development team, Inside Sales team, Field Sales team and Account Management team.
For example, you could hypothesize that the best metrics for your inside sales team are closed deals, deal size, and close rate, while the best activities 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 and help you to take the right actions 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 critical metrics for the sales organization, and that this will be a combination of metrics (to measure how well you’re doing) and activities (that measure how people are spending their time that will lead to your desired results). Getting people involved in this process creates intrigue, and ultimately, buy-in because they have already participated in the process. Even if their ideas weren’t used, they were heard and considered.
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 and 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 been struggling 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 which can yield some insights.
For your front-line sales managers, asking what they think are the most important tasks 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 are 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 metrics vs. activities
As you go through your interviews, make a list of each suggestion. 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: metrics and activities.
You might find that your initial hypothesis is validated, or you might learn something new and important you didn’t think about before.
For each sales team, you want to measure, use your judgment based on your hypothesis and interviews to select 3-4 activities and 2-3 metrics 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 the members of each team agree that the metrics and activities 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 metrics and activities 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. There’s also software solutions out there that can help you go through this entire process and manage all the activity metrics over time, including our company, LevelEleven.
Once KPIs are rolled out, track their progress carefully. If you find that the metrics and activities you choose aren’t 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 (but don’t get caught up in changing these too frequently, which would create a lack of consistency).
If you do see a positive impact on your sales organization — even if that just means a small boost in productivity from your middle performers — then congratulations! You are on your way to becoming a data-driven sales leader.