“The most serious mistakes are not being made as a result of wrong answers. The truly dangerous thing is asking the wrong question.” Peter Drucker
When choosing the right sales performance analytics to focus on and help their organizations grow, sales managers typically face the dilemma of focusing on lagging or leading indicators. Lagging sales metrics tells managers how they have been doing by looking at output and results measured after the fact – total sales, margins and number of customers are examples of lagging indicators. These indicators are results-oriented and focus more on the output than the process. Leading indicators, meanwhile, focus on the likelihood of achieving goals and what might occur in the future, serving as a predictor or a warning sign. While both types of sales metrics are critical for any sales organization to track, the best and most companies focus more of their efforts on studying leading sales metrics.
Why? Consider that the differences between lagging sales metrics and leading indicators is analogous to the different roles of a coroner and a doctor. A coroner performs an autopsy on a deceased person to try and figure out what went wrong in the first place. A doctor looks at warning signs that could suggest something bad might happen (or is in the midst of happening) and tries to prevent these ailments from exacerbating or occurring at all. Just as a coroner cannot bring someone back to life – even if they have pinpointed the exact cause of death – lagging indicators cannot bring a dead deal back. On the other hand, leading indicators give you an idea of what you need to do or how you need to change to be healthier, avoid “dead deals” and gain greater sales success.
Leading indicators are beneficial to sales organizations for many reasons; they provide visibility into how current operations and activities impact the future, map out coaching blueprints, help set team-wide expectations, hold employees accountable for individual responsibilities and keep the execution of high-impact activities consistent. When all employees know what’s being measured, how they’re being reviewed and how these activities contribute toward the bottom line, they are more likely to execute them consistently and at a high level.
Despite these stated advantages, most sales organizations focus more heavily on lagging sales metrics. This is mainly because lagging indicators are very easy to find and identify. Finding results and output after the fact is a simple task and can be easily boiled down and presented in sales reports to executives and shareholders. Tracking the leading sales performance analytics is more complicated. Additionally, it can be challenging to identify the right leading indicators that your company should be monitoring. Here are some of the most critical leading sales performance analytics your sales organization should be tracking.
Average # of days in each opportunity stage
By tracking the average number of days in each opportunity stage, sales managers can get a better idea of which pipeline opportunities are likely to close, thus allowing them to forecast more accurately. For example, if, historically, winning deals spent approximately 7 days in the demo stage, an opportunity that has been lagging in that stage for more than 25 days will be significantly less likely to close. With this information in hand, sales managers can take stock of the current pipeline with a grain of salt, instead of just treating all opportunities with the same likelihood of winning.
Stage-to-stage conversion ratios
This is another key sales performance metric that can drive more accurate sales forecasting for sales managers, while also providing a critical sales coaching blueprint. If a certain rep is seeing a dramatic drop-off from the first stage to the second, this raises a red flag. Is she failing to qualify leads properly? Does he need work improving this specific aspect of the sales process? Leading indicators provide salient coaching points, leading to reps who are more receptive to criticism and improvement and generally more productive sales coaching sessions.
Rep activity conversion ratios
How well are your reps converting activities – such as dials made and emails sent – to closed deals? Many sales managers track the number of dials that their team of sales reps make, but this is ultimately an output-based sales performance metric that doesn’t tell you how your business will do. The fact that a rep made 1,000 connections last month means absolutely nothing how your business will do next quarter. However, looking at their conversion ratios from activities to deals gives you a better idea of how good the rep is at his or her job. If a rep averages a deal every 250 calls, that leading indicator gives you a better understanding of how your team will perform, given a certain input.
Working only with lagging indicators is similar to driving by looking only out the rearview window – just because you know can see the pitfalls that you’ve avoided doesn’t mean you’ll know what to avoid on the road ahead. Tracking leading indicators gives you a crystal-clear windshield to look to the future, allowing you to spot potential pitfalls well before they arrive and knock your vehicle off-course. Stay safely on the road by tracking leading sales performance analytics.
