How to use KPIs to manage your sales team

Setting the KPIs for the CEO is one thing. They tend to be fairly generic. What about someone real, like a sales person. And how do they fit into the reporting system?

If you're a fairly standard accountant you will, like me, find sales people second only in incomprehensibility to marketing folk (the latter because they all seem at least 20 years younger than me now, and talk a language I've never heard). In that case one of the primary goals of the KPIs will be to assist communication. There is no doubt we accountants aren't good at that, so the critical role KPIs can play in this is to help us determine what information anyone needs to fulfil their objectives. I think it is essential to bear this in mind.

Yet not all the sales person's objectives will be financially focussed. When I've been responsible for sales teams my first desire has always be that they are competent. By that I don't just mean that they can close a deal (although that helps).

I want them to really understand what the rest of the company does, how it works, when it can deliver product and what that product really costs. So my first goal for any sales person is that they understand this. The related KPI is that they can demonstrate that they have undertaken sufficient time on training courses and in internal communications.

The standards that will be set will almost certainly be related to time allocation by the salesperson. This might not seem like an accounting issue in the first instance - but it is if you're responsible for preparing KPI reports. The question you need to ask is whether you have got central diary and time recording systems (which might just be Outlook) that let you establish what has been done by each person subject to such a reporting indicator? If not, it's time to look at this.

Inevitably some of the other KPIs of the sales person will be much more financially focussed. All sales people seem to need targets and these are bound to be their KPIs. But, they must suit the goals of the company, so that just setting a sales figure is not enough. It may be that targets need to be set on:
1 absolute sales value;
2 sales mix;
3 total discount from list price.

These cover conflicting objectives for the company. For example, I intensely distrust setting a sales target for absolute sales value alone. After all, anyone can sell £1 coins for 90p, and in extremity, that's what sales value alone encourages.

Sales mix seems vital to me. It gives some direction as to what the company wants sold. Of course it would be crazy to stick to the target in the face of clear customer demand for one item over another, but in most cases sales don't come that way - they happen because an item is promoted, and the company needs to control that process by setting sales mix targets.

Continued...