Do KPIs work for sales persons?

KPI (Key Performance Indicator) probably requires minimum orientation to people in corporate world. The term has already become an identical formula or method to measure performance in the wonderland of corporate managers. To be effective it has to be really three things – an instrument to help you meet your end goal, it has to be trackable and monitored on a regular basis, and it has to be a tangible piece of data to indicate you are headed towards your desired outcome. But the benefits of KPIs can only be materialized if those KPIs were set considering the team’s functionality and the nature of output. I will try to figure out my particular concern on sales KPI and its effectiveness in generating more revenues.

There are many companies where KPIs are treated as a “necessary evil,” one of the reasons is a poor implementation and translation of KPIs to employees. In some cases management set KPIs for a reason but in implementation it faces huge downside. People are always going to find ways to bypass the system. Rewarding based on KPIs may harm your business if majority of your “top performers” abandon all goals that are not measured and incentivized. In a team everything we do in sales is to seek improvement in our KPI’s but the question remains how we determine the work that goes into hitting our targets. Also we need to remember that behaviors drive sales, and the science behind running a successful sales team is related to how leaders learn to develop successful behavioral patterns in their team. While all sales staff must be held accountable to their KPI’s, they must be meaningful rather than wishful or they cannot be taken seriously, and can result in a loss of productivity.

For every business, sales are a “number” game. At the end of the day the only thing that counts is the number. Naturally the sales KPIs ultimately reflect the count of number!!! Regardless what sales people are doing, how they are doing….. Problem is all the task or assignment sales team is dealing with may not turn into number. If your KPIs are just a counting machine of number and there is no subtitle for your sales team then you are setting a standard to discourage sales people. Activity doesn’t always equal quality conversations that lead to a sale. KPI is a balance between good management and data. Too often companies fall back on measuring more ‘data’ when things aren’t going well but usually it’s about the product, market changes or individuals not performing.

So, what is the answer? Yes or No?

Technically it is not possible to find a universally accepted argument on “KPIs for Sales People”. Two points:

• First, a KPI can be useful, but it should reflect both top-down and bottom-up driven and based on the market. Maximum times KPIs are top down driven and not really consider what the market is all about.
• Second, it should reflect both the “leading indicators” and “lagging indicators.” In KPIs “lagging indicators” measure the result of what came before it. Example are variables like closed sales, average deal size and sales cycle length. On the other hand “leading indicators”, are often related to activities undertaken by employees. It measures that reveal whether you are headed towards achieving your desired result, and ideally, they’re controllable.

Some sales managers advocate that KPIs are often an afterthought in sales teams and in many cases don’t affect behavior. The reason for this is that the KPI target is the be all and end all of how sales performance is judged (in many organizations) and they know this even if there are bonuses attached to achievement of KPI targets.

In a closing note, as a part of the whole business process, sales process has to be evaluating through KPIs. But, question is whether the traditional method to set KPI should be altered for sales process KPI? And how many should be in place in order to get the output? Sales people do not like KPI’s and definitely hate too many KPI’s. Quantitative, qualitative KPI’s complete a long list. The point is KPI’s should guide sales performance and not discourage sales people.