Why sales results shouldn't be your primary KPI

Posted On: 18 May 2017

Group of business people pointing out features on a graph.

How are you measuring your strategy success? If you’re using sales figures, we have bad news: you may be doing yourself a disservice and gathering the wrong data.

Here’s what you need to know:

What you’re (probably) using as KPIs

Here’s the problem with using things like sales results as your primary key performance indicator (KPI): they are lag measures. That is, they are measuring what you have already achieved, rather than how well you are working towards your ultimate goal.

Consider this: you use sales results as a KPI. You’ve made x dollars in revenue over the last year—good job! But that doesn’t tell you anything about how well you are doing in the year so far. They are a great way to see where you’ve been, but you can’t act on them today—they tell you nothing about your future performance.

What you should be using as KPIs

Instead, you should be using leading measures as your KPIs. These are the metrics that you can influence today—things that might be correlated with or even causative of your lag metrics, but ultimately are better indicators of your current drive.

These leading measures might be things like website visits, sales calls or conversion percentages. Do you see the difference between these and something like a sales figure? Take these two scenarios: one month, you make x dollars in revenue and get a 50 per cent conversion rate from your website. Another month, you make the same amount, but only get a 25 per cent conversion rate on your website.

Clearly, there is an issue with your conversion rate on the site, but you’ve missed it because you’re too busy looking at the sales figures – the wrong sales KPI. You’re too busy looking in the rearview mirror to notice there might be an issue coming up ahead.

Leading metrics and accountability

What’s more, using leading figures is a far better way to encourage accountability among your staff. If you’re using sales figures, for example, a staff member can look at that, simply shrug and blame it on a slow month. However, if you look at sales calls, and see a big drop there, there aren’t really any excuses to be made.

If that employee is owning that KPI, as they should be, they are able to actively change it and chase their individual goals within the business more easily. It’s the difference between something they can control (leading metrics), and something they feel they can’t influence directly (sales figures). It makes a big difference in the long run, and makes it a far more driving performance indicator for your business.

Sales figures aren’t the best measure to base your strategy and execution performance around—they tell you where you’ve been, which is useful, but don’t tell you where you’re going, which is even more so. Use leading measures instead—activities that you and your employees can actively manage, change and improve. You’ll get more employee engagement and ultimately more accurate data on how well your enterprise is performing.

For more information on the techniques you need to know to make the most of your strategy execution, check out our free ebook below.

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Topics: Business Leadership, Sales, Strategy