Lead vs lag indicators in sales success

Which to measure and why

Lead indicators are great, but only effective if they lead to Lag indicators!

Lag indicators are the ultimate result of your selling efforts! But don’t always tell the full story.

So, which should a salesperson or sales manager measure or monitor? Which is more important? Which do you or your sales manager focus on?

The short answer is, both.

For definition, lead indicators are all those activities and measurements before making a sale:

Number of cold calls or sales calls
Number of prospects in the pipeline
Number of trade shows attended or networking discussions, etc.

Lag indicators are typically defined as sales results:

Dollars or units of sales
Number of accounts
Accounts receivables over 60 days, etc.

Previously, I was a 100% fan of only lag indicators. As a salesperson and sales manager, it didn’t seem important to me to look at anything other than results. Gross margin and low accounts receivable meant I was doing my job.

The reasons for this focus were very clear. I was paid on results, not activities. Make all the cold calls you want, drive thousands of miles a month being busy, or network with the top industry people at every trade show. If it doesn’t turn into a sale, you didn’t accomplish anything. No sale = no commission.

This opinion was further reinforced when CRM programs came out, and every company that launched them measured one thing: the number of sales calls. This is an obvious lead indicator that should lead to sales results (lag indicator). Yet it did not.

However, the last ten years of coaching and training salespeople have enlightened me just a bit to the importance of both. But the two must be connected. A lead or lag indicator, all by itself, is not a true measure of good behaviors, nor consistent results.

A lead indicator must lead to a result. A lag indicator doesn’t tell the whole story.

Each salesperson in their specific sales territory needs to be evaluated on their own measures.

Overly focused on Lead indicators:

I have seen salespeople get overly focused on lead indicators. This is especially true when sales results are down or they are trying to convince others that they are busy. “I’m driving 3,000 miles a month…..I’m working 10-12-hour days……I made 22 cold calls last week……I met with the XYZ manager at the farm show….”

All great. All important. All could lead to a next step. Now, what is that next step? Specifically, with everything you just said?

In those 3,000 miles, what did you accomplish? What caused you to drive so many miles? Are you just a bad route planner, or did you make some strategic sales calls? Is 3000 normal for you or an anomaly?

In those 10–12-hour days, again, what did you actually get done? What caused those long days? Were you truly working hard on solid sales activities or were you over-serving a few customers? If over serving, how do you see that translating into sales results (ROI)? Was that time on your top “A” accounts, or on your B and C accounts?

Wow, 22 cold calls, that’s awesome. How many did you get a follow-up scheduled by the end of the cold call? Cold calls don’t need to result in a sale, as most Ag customers are going to take more than one call to sell. But a cold call with a follow-up means you accomplished something that will lead closer to a sale.

You get the idea on lead indicators. The follow-up questions to those indicators are where the true value is when measuring them.

Overly focused on Lag indicators:

I never thought I would say it, but it is possible to overly focus on lag indicators. By overly focused, I mean that you might attribute all those results to the salesperson’s performance.

The first problem with an over focus on lag indicators/results can be the “Good Results-Bad Behaviors” situation. Meaning, your high-performing salesperson might be:

A tyrant to internal support people. Their success might be due to the salesperson dominating the support team to get their customers priority over other salespeople’s customers.
Extending too much credit to get more sales. They are signing up risky accounts and putting your company at risk of bad debt or increased collection efforts.
Selling customers that shouldn’t be sold. While sales are increasing, they might be setting up the wrong type of customer for long-term success. This is frequent with those who sell to a dealer or reseller network. Salespeople might sell an initial order to a dealer. Sales go up. However, since it’s the wrong type of dealer for your products, long-term sales suffer.

Two last notes on lag indicators.

First, they might be achieved through no effort from the salesperson. Maybe there was a company merger, and the salesperson inherited a set of customers. The important point is to always dig into the lag indicators to understand the story behind those numbers.

Second, a lag indicator does not tell you what the potential sales could have been. Good results could have been much greater. If you sell dairy products in Wisconsin, California, or New York, then your results should be great compared to your peers in Kentucky. The lag indicator looks good for our Wisconsin salesperson, but maybe they should be much higher.

Now, with all that said, I still tend to focus on lag indicators first.

Then I dig into the lead indicators. The reason is that I want to know if the salesperson or sales team is actually getting results. If so, then they may not have to fix or change anything on lead indicators right away.

The standard set of questions to understand a salesperson’s or sales team’s lead and lag indicators:

Most important lag indicators to them?
The current set of results on those lag indicators? and a 1,3,5-year comparison.
Lead indicators they monitor and why?
How closely are those lead indicators connected to lag indicators?
What’s been done recently to adjust either lead or lag indicators?

Good luck and happy stat monitoring to all my analytical friends out there in the Ag sales profession!