The performance of your organization’s sales department is likely tied to measures such as total revenue or sales revenue by product. You can even have geographic information like income from the Northwest or the Gulf States. But in truth, revenue is not a totally effective tool for measuring the effectiveness of the sales department. As with any key performance indicator, there should be a combination of measures that are taken into account by scope and quantity.
Calculating the revenue produced with the existing sales department is simple. It is a mathematical calculation. But by digging deeper into the sales department’s key performance indicators, you begin to get a better idea of how effective the sales department is. For example, if the only performance indicator used for the sales department is company revenue, the changes in revenue may not have anything to do with the sales department. It could be the effectiveness of the marketing campaign, or it could be the fact that the only other supplier of the product just went out of business. Maybe the niche group you’re selling the product to just got a lot bigger, like a product that targets seniors for retirement.
The point here is that measuring revenue is not a complete or necessarily accurate measure of sales department performance.
However, if you were to measure the number of new leads developed by the sales department over a specific period of time, or the ratio of leads to sales, then you would begin to get a more accurate picture of how well you are doing. the sales department. Once you’ve developed measurement tools to help you define such statistics, it’s a fairly easy step to define how effective the sales department is at getting the job done.
While it is critical to isolate performance indicators to measure the performance of the person or department where the responsibility lies, the company cannot lose sight of the fact that many elements can operate to make an overall business successful.
In establishing key performance indicators to measure the company’s progress toward achieving its goal, it is the process that is as important as the results. Using concepts like the Balanced Scorecard process, especially the modified versions that have become popular in the last decade, is an excellent tool for first defining and agreeing on the goals and objective, and then defining the measurement tools that will be used to determine if the goal is being met.
In the example above, the marketing department may be responsible for increasing product visibility through a marketing campaign, but it’s up to the sales department to take those leads and convert them into sales. Neither department would be effective without the expertise of the other, but at the same time, each must be measured by the effectiveness of what it contributes to the mix.
