sales metrics

8/4/2019 Sales Metrics

1/15

1. Manufacturing and Production Indicators

The sheer volume, variety and complexity of managerial issues surrounding the productionprocess makes this area of corporate activity a particularly rich one for non-financial indicators.Performance indicators can be devised for all operational areas.

non-financial indicators, depending on the exact nature of the production process, mightinclude the following :-

indicators deriving from time and motion studies

production line efficiency

ability to change the manufacturing schedule when the marketing plan changes

reliability of component parts of the production line

production line repair record

keeping failures of finished goods to a minimum

ability to produce against the marketing plan

product life cycle

indicators concerned with controlling production quality - right first time

measurement of scrap

tests for components, sub-assemblies and finished products

fault analysis

"most likely reasons" for product failures

actual failure rates against target failure rates

complaints received against the quality assurance testing programme

annualised failures as a % of sales value

failures as a % of units shipped

various indicators of product / service quality

various indicators of product / service reliability

indicators concerned with the purchasing department's external relationships with itssuppliers

inventory levels and timing of deliveries

"just in time" inventory control measurements

stock turnover ratio

weeks stocks held

suppliers delivery performance

analysis of stock-outs

parts delivery service record

% of total requests supplied in time

% supplied with faults

indicators of sales delivery and service

shipments vs. first request date

average no. of days shipments late

response time between enquiry and first visit


2/15

2. Sales and Marketing

measurements based on "staying close to the customer"

complaints re manuals

complaints re packaging / ease of opening

quality of packaging materials

customer satisfaction analysis price of products comparisons

check on unsuccessful visit reports

monitoring repeated lost sales by individual salesmen

sales commission analysis

monitoring of enquiries and orders

sales per 100 customers

"strike rate" - turning enquiries into orders

analysis of sales by product line

by geographical area

by individual customer

by salesmen

matching sales orders against sales shipments - the trend from the mismatch backlog of orders analysis

flash reports on sales

publication of sales teams performance internally

analysis of basic salaries and sales commissions

share of the market against competitors

share of new projects in the industry

new product / service launch analysis

time to turn round repairs

delays in delivering to customers (customer goodwill)

value of warranty repairs to sales over the period

3. People

head count control

head count by responsibility

mix of staff analysis

mix of business analysis vs. staff personnel needs

skilled vs. non skilled

management numbers vs. operations staff

own labour / outside contractor analysis

workload activity analysis

vacancies existing and expected

labour turnover

labour turnover vs. local economy

% of overtime worked to total hours worked

absence from work

staff morale

cost of recruitment

number of applicants per advert

number of employees per advertising campaign

staff evaluation techniques

evaluation of staff development plans

monitoring of specific departments, eg. accounting


3/15

speed of reporting to internal managers vs. HQ

accuracy of reporting as measured by misallocations and mispostings

queries re what reports mean

monitoring of departments performance long term

pay and conditions vs. competition

4. Research and Development

evaluation vs. basic R&D objectives, strategic objectives and project objectives

product improvement against potential market acceptance

R&D against technical achievement criteria, against cost and markets

R&D priority vs. other projects

R&D vs. competition

R&D technical milestones

analysis of market needs over the proposed product / service life of R&D outcome

top management audit of R&D projects

major programme milestones

failure rates of prototypes

control by visibility - releases, eg. definition release, design release, trial release,manufacturing release, first shipment release, R&D release

5. Environment

work place environment yardsticks

cleanliness

tidiness

catering facilities vs. competition

other facilities vs. competition

etc.

6. Final Note

Many executives will talk freely in terms of quality and standards, of "just in time" inventorycontrol, and of other performance measurement yardsticks and may be quite knowledgeableabout them, but when questioned as to the exact nature of the non-financial measurements thatthey actually have in place in the company will be hard-pressed to tell the researcher what thecompany is in fact measuring on an on-going basis. There is a lot of lip service paid to thesemeasures, as opposed to those of a purely financial nature, which are of course to a great extentthe product of regulation and company law. So, much remains to be done to broadcast the meritsof non-financial performance measurement indicators.

7. How to Find Out More about Performance Measurement and Non-Financial Indicators

The Foundation for Performance Measurement, which was established in 1992, is an importantsource of information about performance measurement and non-financial indicators and acts as aclearing house for papers and discussions on the latest thinking. The Foundation is amembership organisation dedicated to extending the scope of enterprise performancemeasurement beyond the conventional focus on internal, historic, financial, numeric and short-term data. It serves not only as a source of information but also as a forum for research and


4/15

debate and a link to tools and resources for organisations interested in developing practical newways of measuring enterprise performance. At its regular meetings the Foundation bringstogether:

major corporations

auditors and consultants

business schools not-for-profit organisations

institutional investors

information providers

professional bodies

software developers

Typically the metrics for sales people involve three main areas:

The quality of what they are doing.This comes down to their skill levels and understanding of what is expected of them.Have the team been adequately trained and are they putting into practice regularly whatthey have been taught?

The efforts they put in.This is the more traditional measurement of the number of sales visits they make butshould also include areas such as numbers of telephone calls, emails, and mailshots andmany more

Who their customers and prospects are.Measurement of the types of prospects and customers is essential so that considerableeffort is not expended on the low profitability customers or those whose long term

potential to the company is small. Segmenting by size of company and potential and thenproviding targets for sales staff will help achieve these goals.

Effective metrics on sales performance are highly sought after by those of us trying to producedashboards helpful to managing the sales cycle. Some metrics would be ideal, but are too costlyto measure or just plain impossible to gather data for. Others are too artificially manipulated. Weall know how crafty sales people are (oops, sorry! Some of my best friends are account execs)

Here is a quick look at 4 elements of sales performance and the sales metrics that correlate to

those categories.


5/15

Sales performance can be broken down into the four elements of :

1. Readiness (how ready is your sales org to close sales leads?)2. Productivity (what is the level of productivity of your sales resources?)3. Efficiency (how well do these resources spend their time?)4. Effectiveness (how well do they close sales?)

By category, here are some typically good sales metrics:

Readiness:

Turnover

Training

Sales Capacity

Employee Satisfaction

Headcount

Productivity:

Revenue per Sales Representative

Margin per Sales Representative

Revenue / Expense

Average Deal Size

Efficiency:

Time Utilization

Sales Cycle Duration

Expense

Effectiveness:

Win/Loss Ratio

Customer Satisfaction

Most Critical Sales Metric

Metric #1 : Total Sales Spend to Total Revenue

o Reflects overall efficiency of Sales Division

o Includes all types of Sales expenses

o Audience: Sales and Finance leadership


6/15

Metric #2 : Incentive Spend to Total Quota Achieved

o Total Incentive should match total quota

o Uncovers problems with quota setting or incentive plan design

o Audience: Sales leaders and Comp Design professionals

Metric #3 : Individual Incentive Earnings to Individual Quota Achieved

o Shows how well incentives pay for sales

o Distribution of earnings to quota should make sense

o Identifies poor incentive design (ramp-up)

o Audience: Sales leaders and Comp Design professionals

Metric #4 : % of Quota Achieved by Region

o Shows regional differences against quota

o Highlights problems with quota setting, sellers performance, or marketing

o

o

o

o strategy

o Audience: Sales and Marketing leaders

Metric #5 : % of Quota Achieved by Market Segment

o Indicates market segment response to product design, pricing, promotion, etc.

o Highlights misappropriation of quota

o Audience: Sales, Marketing and Product Management leaders

Metric #6 : Sales Rep Expenses to Territory Revenue

o Shows how effectively a rep is producing revenue

o Indicates poor territory design, poor decisions on discretionary spend

o Audience: Sales leaders and Financial Analysts

Profit (and Product Mix): The Rest of the Profitable Sales Growth Equation

Revenue and costs are only 2/3 of the story

Profit is largely determined by product margins and product mix

Metric # 7 : Profit as Percent of Revenue by Product

o Measures overall profit margins by product

o Highlights pricing decisions, discounting and price realization in the marketplace

o Monitors profit margins against plan

o Audience: Sales, Finance & Product Management Executives

Metric #8 : % of List Price Achieved by Product

o Highlights problem with product pricing


7/15

o Identifies excessive discounting by sale reps

o Must balance competitive pricing to discounting to achieve quota

o Audience: Sales and Product leaders

Metric #9 : % of List Price Achieved by Sales Rep

o Shows profit margins by territory

o Identifies sales reps who discount excessively

o Audience: Sales Managers

Metric #10 : Product Mix Compared to Sales Plan

o Margins vary by product

o Product mix critical to overall profit

o Identifies product mix variations from plan

o Audience: Sales, Finance, Product and Comp Design leaders

Metric #11 : Product Mix Achieved by Sales Rep

o Identifies which reps are selling a product mix different from plan

o Territory differences or bad quotas may be to blame

o Audience: Sales Managers

Examples of Sales MetricsNick Kirby, who oversees the sales effort for more than 40 sales professionals affiliated withOccupational Health + Rehabilitation, cited a variety of metrics that he relies on to monitor theperformance of the companys sales force:

1. Quality telephone calls - A sales professional might be expected to make, say, 40telephone calls per week (or eight per day) with a decision maker or influencer. Callsto gatekeepers or to qualify a potential account are not considered quality calls. Note

that total calls should never be used as a stand-alone measure, per se, but rather inconjunction with other metrics such as appointments and generated revenue.

2. Face to face sales appointments - Similarly, face-to-face appointments provide anothervital sales metric, but only if defined as quality appointments. A quality appointment mustinvolve new sales and likewise involve only a decision-maker or influencer. Mr. Kirbyfeels that 15 quality appointments per week is reasonable.

3. Conversion rates - Rates and ratios constitute a useful application of performancemetrics. A salespersons conversion ratio (e.g., closes divided by face-to-faceappointments) provides some measure of the sales professionals performance. Note,however, that the two dilemmas (What constitutes a close and is the sales person callingon the best prospects?) are not covered by conversion rates.

4. New revenue per sales professional - Numerous variables impact the level of desirednew revenue per sales professional. Clearly, the larger the market, the greater theopportunity for a sales professional to find new sources of revenue. Further, a states feeschedule can have a significant impact on this measurement. Salesperson A andSalesperson B can sell exactly the same volume and mix of services in adjoining statesyet generate markedly different revenue. The term new revenue requires review. It isgenerally defined as a combination of new accounts and incremental revenue fromexisting accounts.


8/15


9/15

Invest in Design.

At a time when we are losing manufacturing jobs in this country, we should be doing

everything we can to help our manufacturers stay competitive. They are the backbone of

our economy.

Amateurs work until they get it right. Professionals work until they can't get itwrong.

Time waste differs from material waste in that there can be no salvage. Theeasiest of all wastes and the hardest to correct is the waste of time, because

wasted time does not litter the floor like wasted material.

The first rule of any technology used in a business is that automation applied toan efficient operation will magnify the efficiency. The second is that automationapplied to an inefficient operation will magnify the inefficiency.

Provide service to improve value to customers, employees and shareholders.


10/15

Design for manufacture

Evaluate, recommend, and support technology resources that improve theeffectiveness and efficiency of those who use them.

Analyze managerial and operational procedures, identify best practices and assistwith implementation of new procedures.

Facilitate special projects.

Organizational productivity is often measured by using this equation:

Productivity = goods and services produced (outputs) / labor + capital + energy +

technology + materials (inputs)

This approach considers all the inputs involved in producing outputs are sometimes

referred to as total-factor productivity. Managers also use partial-factor productivity, an

approach that considers the total output to a specific input, such as labour. For example:

Productivity = goods and services produced (output) / labour hours (labour input)

Two Operational Strategy - Low cost Producer and Innovative Producer

Production Measures

There are three categories of control standards and measures:

* Precontrol (of inputs) focuses on predetermining standards and measures for thequantity and quality of resources inputs (labour resources, capital resources and

materials).

* Concurrent control relates to how much and when outputs will be produced and is

typically termed production scheduling. Popular tools for production scheduling includevarious network models such as the Program Evaluation and Review Technique (Pert)

and linear programming models.

* Postcontrol focuses on actually analyzing the output. Two techniques are widely used

postcontrol. First, standard cost analysis involves estimating and combining the direct


11/15

labour, direct materials, and overhead costs to find actual per unity costs. Second,

statistical quality control focus on detecting low-quality or defective output.

Managers use periodic statistical reports to monitor and evaluate nonfinancial

performance. Such items a the number of new customer contract, delinquent accounts,

sales volume received, number of employees, and other statistic reports vital to thedepartment or business units are included. Statistical reports can be issued weekly,

monthly, or quarterly and provide feedback about departmental or business unit's results.

Management by objective is a method whereby managers and employees define

objectives for every department, project, and person and use them to control subsequent

performance.

a control principle which suggests that managers should be informed of situation only if

control data show a significant deviation from standards.

Group

POM incorporates many tasks that are interdependent, but which can be grouped underfive main headings:

PRODUCT

Marketers in a business must ensure that a business sells products that meet customerneeds and wants. The role of Production and Operations is to ensure that the business

actually makes the required products in accordance with the plan. The role of PRODUCTin POM therefore concerns areas such as:

- Performance- Aesthetics

- Quality

- Reliability- Quantity

- Production costs

- Delivery dates

PLANT

To make PRODUCT, PLANT of some kind is needed. This will comprise the bulk of thefixed assets of the business. In determining which PLANT to use, management must

consider areas such as:


12/15

- Future demand (volume, timing)

- Design and layout of factory, equipment, offices

- Productivity and reliability of equipment- Need for (and costs of) maintenance

- Heath and safety (particularly the operation of equipment)

- Environmental issues (e.g. creation of waste products)

PROCESSES

There are many different ways of producing a product. Management must choose the best

process, or series of processes. They will consider:

- Available capacity

- Available skills- Type of production

- Layout of plant and equipment

- Safety- Production costs

- Maintenance requirements

PROGRAMMES

The production PROGRAMME concerns the dates and times of the products that are to

be produced and supplied to customers. The decisions made about programme will beinfluenced by factors such as:

- Purchasing patterns (e.g. lead time)

- Cash flow- Need for / availability of storage- Transportation

PEOPLE

Production depends on PEOPLE, whose skills, experience and motivation vary. Key

people-related decisions will consider the following areas:

- Wages and salaries- Safety and training

- Work conditions- Leadership and motivation- Unionisation

- Communication

Main Principles of TQM


13/15

The main principles that underlie TQM are summarised below:

Prevention Prevention is better than cure. In the long run, it is cheaper to stop products

defects than trying to find them

Zero defects The ultimate aim is no (zero) defects - or exceptionally low defect levels if a

product or service is complicated

Getting things right first

time

Better not to produce at all than produce something defective

Quality involves everyone Quality is not just the concern of the production or operations department - it

involves everyone, including marketing, finance and human resources

Continuous improvement Businesses should always be looking for ways to improve processes to help

quality

Employee involvement Those involved in production and operations have a vital role to play in

spotting improvement opportunities for quality and in identifying quality

problems

Conclusion: Control ofOperations

Before commencing implementation of control systems there are always five beneficial things to

do which will make any method of control easier to implement and make the system work better

operationally

(Generally world class manufacturing businesseshave done these things)


14/15

Reduce time wasted in setting andreduce set up timesForm Natural Groups (cells)Conclusion: Control ofOperations

Before commencing implementation of control systems there are always five beneficial things to

do which will make any method of control easier to implement and make the system work better

operationally

(Generally world class manufacturing businesseshave done these things)Reduce time wasted in setting andreduce set up timesForm Natural Groups (cells)

Reduce throughput timesPostpone product mutationRemove the trivial many, to focus on vital few

CONWIP stands forConstantWork-In-Process,

and designates a control strategy that limits the total number of partsallowed

into

the system at the same time

CONWIPcontrol.Movement of partsOncethe

partsarereleased,they

are processed as quickly as possible until they wind up in the

last buffer as finished goods. One way to view this is that the system is enveloped in a single


15/15

Kanban cell: Once the consumer removes a part from the finished goods inventory, the first

machine

sales metrics

Documents