When evaluating performance, company leaders—even some leadership coaches—often focus on lagging indicators like revenue, profits and other metrics found on the income statement and balance sheet. While it is important to keep track of lagging indicators, it is far more productive to understand leading indicators—the forces driving revenue and profits.
Here’s an example. Let’s say your total sales goal is $5 million dollars, and a salesperson has an individual sales goal of $1 million of that total. Start by determining your average sale amount. Once you have that number, manage your salesperson’s quota by tracking their number of phone calls, meetings and proposals. A predictive pattern will emerge that shows you how many connected phone calls lead to a meeting, how many meetings lead to a proposal, and how many proposals lead to a sale. By managing these leading indicators, you can predict whether or not your salesperson will achieve that $1 million goal, determine which people need training and coaching, and which ones are not capable of doing the job.
You can identify leading indicators for every item on your income statement. Simply break down the end numbers into the activities that produce the results and track them over time to identify the patterns. Then, work to measure and improve upon each indicator.
Don’t make the all-to-common leadership mistake of failing to recognize cause and effect. By inspecting and improving the items that cause the monetary results, you can figure out exactly how to improve those results with very real metrics.
Howard Shore is a leadership coach who works with companies that need leadership development and business management coaching. Based in Miami, Florida, Howard’s firm, Activate Group, Inc. provides strategic planning and management coaching to businesses across the country. To learn more about sales force development through AGI, please visit activategroupinc.com, contact Howard at (305) 722-7216 or email him.