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How leading indicators can help keep your eyes on the prize
by Peter Rathmann on December 20th, 2012

During my spare time while traveling for a project with a major Midwest manufacturer, I decided to summarize a take away I had from reading “The Four Disciplines of Execution”.1 The book is very relevant for any of us who have started major initiatives in our organizations only to watch them be stifled by competing priorities or as I call it, “the tyranny of the urgent”. These are daily need-to-do activities and organizational fire fighting that makes us wonder what we actually accomplished and did all day.
 
After an organization determines a relevant business goal they want to achieve and target date for completion, they traditionally measure their progress through what the book calls “Lagging Indicators”.  These lagging Indicators are reflective of the goals that we traditionally set quarterly or annually such as:
  • Increase sales from $500K to $625K by 2015.
  • Increase the number of dealers from 10 to 15 by 2013.
  • Reduce cost of sales by 10% by Q3.
  • Increase average selling price per transaction by 5% by March
  • Increase our market share by 10% by 2014.
Sound familiar?  If achieved, any of these are all good indicators of success, but when does and organization traditionally look at the results? Most of them only look at their progress a few days before the target completion date.  This can produce only one of two possible results: a sense of jubilation and desire to celebrate, or a instantaneous increase in your pucker factor that now has you worrying about your year, your career, and the future of your organization.  Using these lagging indicators to measure success at the end of a target date is about as useful as looking in your vehicles rear view mirror to navigate in a forward direction.
 
What if you could measure your progress along the entire way toward your target date?
What if you were able to change your game plan at half time instead of the two-minute warning?  What if everyone in the company knew could measure results on a weekly basis?
What do you have to start measuring to be able to do that?
 
The book introduces the development and use of “Leading Indicators”.  Leading indicators measure the achievement of specific activities and activity levels that are necessary for you to achieve your goal.  These can be as simple as:
  • Meet with 10 new qualified targets per week.
  • Present to 4 qualified prospects per week.
  • Up sell 10 clients per week.
  • Mail 100 new information packets to targets per month..
  • Complete 3 field assessments per month.
  • Participate in 2 trade shows per quarter
All of these leading indicators can be reverse engineered from looking at your past successes and determining what activities helped you get there.  For example, if your goal (lag indicator) is to sell $100K of materials in 10 months to new clients, your average client is worth $10K, 50% of the prospects let you send them a quote, and you closing ratio is 10%, then you will have to talk to 200 prospects and propose to 100 of them to reach your goals.  Breaking down these activities into leading indicators determines that you need to talk to 20 new prospects and propose to 10 of them every month or even talk to five prospects a week and propose to 2.5 of them on average. Your goal of $100K in new revenue in 10 months does not seem all that hard to achieve know what you have to do each week in the midst of the tyranny of the urgent.
 
The last words of advice from the book are to develop and maintain a public score card that helps everyone in the organization understand how they are meeting their leading indicators and progressing towards their goals on a weekly/monthly basis.  Read here to understand the benefits of keeping score properly to drive accountability in your organization or contact us should you like help developing relevant leading indicators to help you achieve your goals.
 
1. The Four Disciplines of Execution: McChesney, Covey, and Huling, Free Press 2012
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Posted in Business Strategy, Make the Goal, Sales Metrics, Sales Optimization, Sales Process Engineering, Strategic Planning    Tagged with Leading Indicators, Metrics, Business Intelligence, Sales Management, Strategic Planning, Sales Figures, Increased Sales


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