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Five ways that middle-market companies use KPIs to drive higher performance

Oct. 6, 2020 | Article | 8-minute read

Five ways that middle-market companies use KPIs to drive higher performance

“What gets measured, gets done,” or so the old adage goes. And the “what” really matters. Designing the right set of sales KPIs means you’re charting the right course against your primary business objectives, clearly linking to your profits and losses and using KPIs to make better decisions. But how this gets measured matters, too. In fact, not just how it gets done, but that it gets done well, and that it gets done well over and over. 


With market certainty out the window for the foreseeable future across all sectors, companies will need to lean on the right set of KPIs and not be afraid to adapt them as they go. That’s why ZS asked more than 200 middle-market executives for their recipes for success with KPIs—which KPIs they track and why, and how they’re shared and used across their organizations. In our study, we measured an out-performing, high-growth cohort—tech, healthcare and business services companies that reported an average annual revenue growth rate of more than 15% for three years—against their slower-growth peers.


We found that out-performing companies had important differences in their KPI strategies. These fast-growing organizations weren’t tracking more KPIs than their peers; rather, they were looking at different metrics (more complex, calculated KPIs) and reviewing and adapting them more frequently while sharing them more widely across their organizations to align across functions.


KPIs need to answer critical questions, like which customers are picking you and why, how well sales and marketing spend is fueling the business, and how healthy (and fast) your pipeline is. By answering these questions first, out-performing companies in our survey are cutting through the noise and focusing only on what’s important. Here’s how these high-growth companies are thinking about sales KPIs differently: 


1. Curating KPIs and boiling them down to the metrics that matter most for business objectives. High-growth companies track about the same number of KPIs as their slower-growing peers; 23 vs. 21 on average. But for them, the “K” in KPI stands for “key,” not “keep them coming.” As one executive put it, they’re “trying to focus on which data is really meaningful” because “the more data you collect, the less action you take.”


Like an experienced gardener, you need to “prune” extraneous KPIs. While many high- and low-growth companies expect to use the same amount of KPIs next year, half of the high-growth companies in our survey tracked new KPIs last year, compared to 34% of low-growth companies. Thus, high-growth companies are more likely to adopt new KPIs and, importantly, abandon metrics that are not useful to their objectives.


So review new KPIs against your current set and ask if you’re able to take better, more informed action against a business objective with a KPI, or whether you’re sharing a new data point just because you can. How does this metric deliver more value to your priority customers, help your team more efficiently serve the market, or both? Data overload leads to distraction at best, paralysis at worst.


Simple metric deselection is the first step. For a more radical approach, consider the story popularized by Michael Lewis in Moneyball. The Oakland Athletics’ willingness to review their KPIs and stop focusing on outdated metrics commonly accepted by their industry (MLB) led them to data-driven out-performance, even at a resource disadvantage to other teams.


2. Making change part of the process. Fast-growing organizations should reevaluate their KPIs in a structured cadence, and more than once a year. Most middle-market companies, 80% of our survey respondents, evaluate their KPIs at least once a year. However, for some fast-growing companies, that isn’t the last time they look at KPIs. About a quarter of high-growth companies also review KPIs each quarter vs. 13% of their peers.


While still relatively rare, creating a recurring session for quarterly review of KPIs forces consideration of how your goals (and therefore metrics) should shift quarter to quarter, especially in this fast-changing environment. In contrast, slower-growing companies were more likely to set KPIs on an ad hoc basis (12% vs. just 4% of high-growth companies), which runs the risk of creating time-limited metrics (“Did we complete X by Y?”) versus tracking the impact of an effort against an overarching goal (“How did the campaign impact one of our key metrics?”). 


To understand how a quarterly focus on KPIs can yield big results, we can look to Google and its objectives and key results (OKR) practice. Each quarter, Google takes a critical eye to its objectives and key results, with a transparent evaluation of suggested metrics across the entire company. This OKR practice helped Google hit one billion daily viewing hours on YouTube through quarterly, incremental goals to keep teams focused.


3. Remembering that growth is driven by customers receiving value. Don’t shy away from calculated KPIs, but make sure they’re simple to understand and lead to clear decisions and interventions. While high-growth companies tend to select the same number of KPIs, they’re more likely to use calculated KPIs to guide their planning. For example, 50% of high-growth companies track customer lifetime value (CLV), a metric comprised of multiple data points, including average customer spend and purchase frequency. By contrast, just 22% of the slower-growing cohort in our study track CLV. High-growth companies are also more likely to track other calculated KPIs like win rate and advance rate through each pipeline stage. Using more complex KPIs versus simple activity tracking gives you a more nuanced view of your organization and helps you make better decisions. Knowing CLV, rather than just average customer spend, makes it easier to decide how much to invest in new customer acquisition campaigns.


When considering how to use these complex KPIs, consider how your metrics can measure the values that matter most to your customers. Whether time or cost savings, or something else entirely, developing KPIs that quantify such key metrics helps your teams focus on activities that truly create value for customers as well as more meaningful, data-supported business reviews.


You might not expect advanced analytics and complex, calculated KPIs in a traditional industry like mining. However, explosive materials provider Orica sets itself apart in the market with its data capture and insights delivery. The Australian company’s BlastIQ online system delivers and sorts KPIs about each mine blast—efficiency, cost savings and sustainability data—in a way that means the most to the engineers using its products.


4. Use KPIs to align the entire commercial team and better link marketing and sales activities. While we see that most companies track about the same number of KPIs, fast-growing companies share them more widely at lower levels in their organizations. This becomes their North Star, with everyone up and down the chain, from marketing to sales, product, operations, engineering, service departments and beyond understanding and using the data. 


The average high-growth company shares about 12 common sales KPIs with their sales reps, versus an average of eight shared to sales reps by their peers. While it’s important not to overwhelm teams with data, increased transparency and a better view of company performance can help teams see their impact. For example, 32% of high-growth companies share the value and volume of opportunities across pipeline stages with their sales reps, versus 15% for slower-growing companies. 


Companies are also now focused on adding KPIs that link marketing and sales, ending siloed practices with team-specific KPIs. Over the last three years, the most frequently added KPI has been total leads by source, followed closely by pipeline velocity. Qualtrics is one company that practices this kind of radical transparency with metrics. At this survey giant, every employee is free to see the performance data and goals of any other employee. Making this data freely available allows for an honest and open look at current performance and full alignment up and down the organization.


5. Designing dashboards with the audience in mind, especially front-line sales managers. Arming sales managers with dashboards can help them lead more productive discussions, and it means they spend less time sifting through data and more time coaching their teams. Our survey found that increasing a first-line manager’s time spent coaching reps from under two hours to more than three hours led to a 19% increase in district goal attainment.


The key is selecting KPIs that guide the desired sales management behavior: coaching teams to productive (and potentially new) behaviors and looking beyond the activity being measured to the nature of the activity being measured. For example, about half of out-performing companies share the number of prospecting calls with their first-line managers. What’s missing still is enough specificity to understand how well these activities truly move the needle. For instance, be more specific by asking how many new decision-makers were identified in current accounts this week, or how many strategic business reviews were held for top accounts last month.


Recognizing this need for a set of actionable metrics designed for a specific team, Apple developed a simple scorecard of five KPIs in the ’90s to guide senior managers. The purpose of the metrics was to guide planning and forward-looking decision-making, not to serve as a check on past performance.


Your organization doesn’t need to be Google or Apple to model KPI best practices. After all, our lessons come from middle-market companies—about half of the high-growth cohort is under $100 million in revenue (though not for long).


Here are a few ways to put these plans into action:

  • Curate your KPIs: Take a look at your most commonly referenced KPIs and ask yourself this: What decision do they enable? If you’re not sure, consider removing those KPIs in a quarterly KPI review session.
  • Add structure to your KPI review: Put a Q4 2020 KPI review session with key decision makers on your calendar right now, and while you’re at it, set it to recur for Q1 2020, Q2 2020 and so on.
  • Pick KPIs that make decisions easier: Reflect on some of the most difficult decisions you made this quarter, and then jot down what information or KPI could have helped you make a better decision. (Did you debate making an investment to capture a new segment? If you had known your CLV by segment or subsegment, would you have felt more informed?)
  • Develop connective tissue through KPIs: Review your current KPIs and who sees them against your organization-wide goals. Select one or two KPIs that would help unite all teams around a common goal (a customer experience measure, for example) and commit to displaying this KPI publicly or including it in a regular communication each month.
  • Launch simple, transparent dashboards: Ask your first-line managers the amount of time they spend downloading data and calculating metrics to guide their conversations vs. time spent coaching their teams. Their answers might surprise you. If they are spending too much time figuring out metrics, they could have less time to coach or their coaching might not be as effective. Compare the time spent each month or week against the time it might take to automate dashboards for each sales manager in your CRM.

Navigating today’s market uncertainty means not only measuring the right KPIs but also measuring and using KPIs in the right ways. As you set look to set new strategies and goals for 2021, you can take your cue from high-performing middle-market companies and use Q4 to critically review your current KPIs, set new metrics and design processes that position your organization for success.

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