The Everyday Guide to Leading and Lagging Indicators
Today, analytics are everywhere. We count our calories, sets, sleep, and our steps. Sports fans obsess over shots made, batting average, and greens in regulation.
For sales organizations, these numbers are expressed in raw data we call leading and lagging indicators. Our white paper, The Ultimate Guide to Developing a High-Performance Sales Organization, examines six pillars of successful organizations. And it discusses how these indicators impact performance and development. In that sense, they are essential to understanding how we are doing and how to improve.
Let’s explore these indicators in more detail. We’ll start with lagging:
In something of a misnomer, “lagging” indicators can give the impression of falling behind. However, rather than a number that is not high enough, they are named because they look backward. Since they record results, lagging indicators are immutable facts. They may or may not indicate success. But they cannot be changed, at least not in your present sales cycle.
Here are some examples of lagging indicators:
- Units sold
- Gross margin
- Gross revenue
- Market share
- Deals won
- Deals lost
- Closing percent
- Average deal size
As any sales outcome is the result of numerous factors, lagging indicators are a snapshot of what you’ve accomplished. They show where you have been. They do not necessarily say anything about how you got there or where you are going. For that, you need to examine your leading indicators.
Leading indicators are so called because they look forward. They “lead” us to success and show organizations what they must do to achieve specific outcomes. As such, they can provide insight into the activities that contribute to our goals.
Central to this are activity-based metrics. These track the behaviors of your sales team and reflect their progress in achieving your goals. Most importantly, you can look at this in real time and adjust before a deal is final.
Activity-based metrics are key leading indicators that track your sales team’s activity. These are the things they do—daily, weekly, monthly, or quarterly—that drive new opportunities. Here, organizations have the benefit of hard numbers. Most importantly, in addition to being trackable, they are changeable. Here, we’ll examine two key activities, calling/emailing new prospects and proposals sent.
Phone calls are a bread-and-butter staple for sales professionals. However, this ubiquity makes it easy to dismiss their importance as leading indicators.
Depending on your industry and size, BDRs can make anywhere from 35 to 100 calls a day. But the analytics of phone calls are not always easy. It’s essential we understand what to track. Here are some key call metrics and what they reveal:
- Number of Calls/Emails Per Salesperson/Team: Though this seems easy, activity and productivity are not always equal. A rep may exceed your team in calls made. However, without a positive result, it’s not productive. Set specific goals for your team and each rep. These should include a timeframe, such as calls per hour/day/week.
- Average Call Length: More than the number of calls, the length of each is important. Longer calls often mean better engagement. But this can be deceiving. A rep can spend 10 minutes on a call, having a great time. If it doesn’t generate interest, it’s a waste. Still, it’s essential to know each seller’s average call length. By itself, it might not mean much. However, in relation to other indicators, such as conversion rate, it can show the rep’s overall productivity.
- Calls/Emails Per Meeting: The number of calls it takes to net a meeting is telling. Of course, you want to keep this as low as possible. However, results count more. This metric can show the quality of the leads you’re generating. It can also show if reps are establishing rapport, generating interest, and managing the sales process.
- Call Outcome: Today, it’s rare to reach the right person on a single call. Many initial calls go directly to voicemail. That’s why it’s helpful to know the outcome. Did the intended recipient answer and hang up within seconds? Of course, top sellers vary the days and times of their prospecting calls. In the same way, organizations should monitor the outcomes of phone calls to maximize results.
The number of new proposals/quotes generated can predict future sales. The more proposals, typically the greater potential for sales.
As a middle-funnel indicator, new proposals tell you a lot. For one thing, it shows how your team’s efforts have paid off. By this stage, reps have discussed your products and/or conducted demos. Perhaps, they have overcome initial objections and interested prospects enough to warrant a proposal.
However, rather than a single rate, which can be limited, organizations are best served by examining several specific proposal metrics. Here are some examples:
- Proposal Volume: This is the number of completed proposals submitted to your clients. It shows the health of your pipeline. For example, a slow or reduced volume of proposals can indicate issues in the initial stages of your pipeline. Here, you may consider coaching or training that targets prospecting.
- Average Proposal Value: This is the average quoted price per proposal (total pricing divided by volume). A lower number here can indicate reps are not fully identifying needs or they are discounting too heavily. Here, you may consider coaching that targets fact finding and discovering client needs. The more needs identified, the more solutions your reps can bring to the table.
- Proposal Conversion Rate: This measures the efficiency of the proposals your team sends. In this sense, it’s like your shooting percentage in basketball or your batting average in baseball. To boost this number, solicit the right buyers, i.e., ones with budgets to progress quickly.
- Proposal Age: This is the time from creation to close/decision. Of course, the more time, the less likely the deal. Unlike wine, deals typically don’t age well. Here, you want to ensure reps track their proposals and keep the momentum of the sales process moving forward. If the average age is high, the pipeline could be at risk.
Whether exercising, watching sports, or doing your job, you can’t ignore the numbers. For health, we get our reps and walk our steps. In sports, analytics help us cheer or jeer our team’s decision making.
Of course, sales is a people-first career. We build relationships, solve problems, and improve the lives of our clients. The same is true of sales organizations, on a larger scale.
While sellers have quotas and incentives, organizations have leading and lagging indicators. In all cases, the numbers gauge performance. For our businesses, clients, and team members to thrive, these indicators are pieces of a puzzle. Together, they present a complete picture. In sales and in life, to know where we’re going, we must know where we’ve been.
For more, see our white paper, The Ultimate Guide to Developing a High-Performance Sales Organization.
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