Setting KPIs for the Sales Team: 6 Things to Keep in Mind

Setting or modifying KPIs for the sales team may be a challenging assignment for the managers. Each KPI needs to be reasonably challenging, achievable and, most importantly — contribute to the expected end result (hitting the target). Every account manager needs to be enabled on how exactly hitting KPIs is connected with the end result. Not only do the sales managers need to say “I believe this is important, so we’re doing it”, but clear data points need to be presented that show a correlation between hitting and overachieving KPIs and demonstrating consistent performance from the quota attainment perspective. While getting the buy-in from the team is challenging, making sure that the KPIs are meaningful and reflect the specifics of the business is equally important. Let’s discuss the factors that the sales leaders need to take into account when setting KPIs and the impact of each of them on the probability of hitting those KPIs.

Specifics about the books of business

One of the first things that need to be taken into account when setting KPIs is what a common book of business that’s going to be assigned to the sales rep looks like. The first factor here is the size of the book. For example, the KPI of the volume of phone calls per week might be completely different for a book that has 400 accounts versus one that only has 15. It might be a good idea to come up with an expected engagement level with the book — e.g. the AMs are supposed to get in touch with every customer in their books at least once per quarter. Then a high-level assessment will be made on how many touches are required on the average to get the customer on the meeting. As a result of this calculation, the targets for outbound activities can be set.

Since account managers have sales quotas to hit it’s important to take into account the average duration of a deal cycle from an opportunity discovery to its successful closure. Keep in mind that at any given moment an AM can effectively manage only a limited number of opportunities. If the number of them goes noticeably above the norm, room for error is created: AMs forget to follow up on commitments, don’t have sufficient slots on calendars for negotiations, etc. That said, when coming up with a KPI on the volume of opportunities created — per week, month, or quarter — the total expected volume of managed opportunities needs to be taken into account. That said, if your business is highly transactional and opportunities could be discovered and closed within the same week, the KPI could be significantly different from the one set for the team working with enterprise accounts, where the duration of one deal could be as long as 6 months (or more).

The volume of administrative work

In every sales team, there are certain expectations regarding the administrative activities that team members need to perform on a daily basis. Among others, they include creating opportunities in CRM, filling in the deal qualification notes (e.g. BANT, MEDDPICC), logging in the activities (e.g. phone calls, emails), filling in the details on the next steps, participating in meetings, and more. Overall, these activities can be generalized as non-customer-facing work that is important for the business and its processes. That said, when the KPIs are being determined, the leadership team needs to take into account the expected volume of such work and adjust KPIs accordingly. As a result of this exercise, it usually becomes apparent that expecting the reps to spend three-quarters of the day on customer meetings and the remaining quarter on prospecting is not sustainable if the leadership wants to have visibility into the work team members are doing. Also, such analysis may provide valuable insights into the whole scope of administrative activities team members are engaged in, which enables leaders to re-evaluate these activities and possibly eliminate some of them. For example, they may discover that one of the weekly meetings is fully dedicated to opportunity review. So if team members build the routine of maintaining a high level of CRM hygiene, the need for such meetings would be eliminated and an extra hour would become available for customer-facing work.

Current statistics

When analyzing individual performance, sales leadership has the opportunity to review the results of top performers, good, stable performers, and those who are currently not demonstrating the best level of work. It might be tempting to set the KPIs in a way that would reflect the performance of the most successful reps. However, this might not be the best idea. Before setting the benchmark too high, it’s critical to review the reasons why the top performers deliver such amazing results. Here are several factors to review:

• How long they have been in the company
• Did they have sales experience before joining the company?
• How long have they been working with the current book of business
• Do they work on the clock or staying extra hours every day is a norm for them?
• What does their day look like? How do they plan their time?
• Did they have an experienced mentor when they joined the company or did they figure out everything on their own?
• And more

The answers to some of these questions the managers can get on their own and to get the missing pieces it might be a good idea to do mini-interviews with top performers. The insights received from such an evaluation could be eye-opening for the leadership team. Firstly they may discover certain best practices that should’ve been scaled to the whole group a long time ago. Secondly, they may find out that it would probably not be the best idea to set KPIs for the team with varying levels of seniority based on the performance of a couple of reps who have been working in sales for the last 10 years, are experts in the product, market, and stay in the office minimum 12 hours every day.

Ambitious or conservative

Another thing sales leadership needs to keep in mind when deciding whether to set challenging or conservative KPIs is whether a certain activity is new to the team or it is something that reps have been doing for a while already. Anyone experienced in change management would confirm that change is hard and small incremental steps are often better for the progress than trying to accomplish something huge in one go. That said, whenever I’m introducing a new activity for the team members, I always set a reasonable daily/weekly target that would not put too much pressure on the team members. But at the same time, I always emphasize the importance of this activity and highlight that the reason why the target is conservative is that I want the team members to have the time to actually accomplish it and would expect weekly progress on it. When the target is set too high there’s a risk the initiative will receive a bigger pushback from the team which would make a negative impact on the results.

Be prepared to be flexible

Being consistent with sales activities is critical for success. Phone calls and emails lead to meetings. Meetings enable reps to discover opportunities. The more opportunities are discovered the higher the probability of hitting and overachieving the target. However, it doesn’t mean that once determined KPIs would be something that’s written in stone. Sales leaders need to review the KPIs regularly and do a sanity check to confirm that they still make sense and reflect the current business processes. For example, there might’ve been a KPI on client engagement on LinkedIn. However, over the course of the last 6 months, it might’ve been apparent that this prospecting channel didn’t prove very effective for the team, and most successful reps have already stopped doing it and reallocated the time to make more phone calls or send outbound emails. Or the structure of the books of business has changed dramatically and the volume of accounts has grown by 40% compared to the time when KPIs were set. Leaders need to keep in mind that KPIs are not self-sufficient metrics — they all need to be tied to the expected results. And if, for any reason, it’s no longer the case, it might be a good idea to change or completely remove some of them.

How KPIs are going to be tracked

There’s a famous saying that measurement is the first step to improvement. Any KPIs would be useless if there’s no clear way to track their achievement by the reps. Whenever they’re being set, leaders need to have an answer to the question of how visibility into KPIs would be achieved. Is there an easy way to set up a tracking dashboard in the CRM? Do any integrations need to be built? What manual input is required from the reps on a daily basis? How much time this is going to take? What is the risk of human error and incorrect data? Even after the tracking mechanisms have been established, it would be a good idea to do spot-checking every now and then and confirm that reported data points correlate with reality. For example, when I see that a certain rep in my team has done a very low number of phone calls last week the first question that I ask is whether the calls have been logging in correctly lately or there were problems on that front. Unfortunately, none of the CRMs are ideal and the best integrations that one might’ve set up can stop working for unexpected reasons.

Having a good system built for KPI tracking — whether manual or automatic — enables sales leaders not only to understand the current level of performance but also to review trends and get valuable data points which can be then demonstrated to other team members to support the statement on the importance of hitting the KPIs.