Leading Indicators

In all businesses, whether large or small, new or old, there are leading indicators of success and failure; a factor or two that can be used to predict future results.  

So, we are seeking predictable linear indicators in our non-linear world of sales (tumultuous laughter!).

For insurance agents, brokers, producers and sales organizations in general, we view the key leading indicators as:

New business appointment levels

How much business is “In Process” defined as: Prospects in the proposal stage, measured in terms of potential revenue and the number of accounts

The number of referrals generatedInsurance Carriers can look toward these leading indicators:

Appointments/contacts with agents and brokers

New business submission levels

How many new people from new or existing agents and brokers have you met this month? 

Choosing your leading indicators can be the easy part.

Where the difficulty typically arises, only 100% of the time, is the measurement of your progress, your important activities.  These measurements usually start and stop, fade in and fade out – this happens so often that we have concluded that it is a natural part of the sales process!

We recommend that you start and then begin again until this becomes your standard operating procedure.  Until it becomes “this is the way we do business around here”.

Some definitions may be helpful.

Lagging Indicators: Measures results at the end of a time period, normally characterized by historical performance. Also referred to as Key Results Indicator (KRI)

Examples:

Closed Sales

Renewal Ratio

Total Customer Contacts

Total Incidents/losses

Advantages:
• Normally very easy to identify and capture

Challenges:
• Historical in nature and does not reflect current activities
• Although we regularly base our view of the future on lagging indicators, they pretty much lack reliable predictive power.

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Leading Indicators: Measures the “drivers” or leaders to the achievement of (guess what?) lagging indicators; normally measures intermediate processes and activities.

Examples:

Number of New Business Appointments

New business “In process” (in the proposal stage)

Number of Outbound Prospect Contacts

Number of Active Lead / Referral Sources

Advantages:
• Predictive in nature and compels the individual and organization to make course corrections based on these indicators.

Challenges:
• May prove difficult to identify and capture; these are often new measures with no history and no easy way to capture the data within an organization. This is usually blamed on the technology in place that is designed to report on lagging indicators.

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With accurate knowledge of only two or three indicators, course corrections can be made quickly.  This is the only reason to track these indicators.  Another challenge: will you or your team modify activities and behaviors based on the leading indicator outcomes?

So now for some homework:
Starting from the possible and moving toward the impossible…

Identify two of your Leading Indicators by Friday.
For example:

How much revenue and how many accounts are in the proposal stage this month, right now?  Not what you sold, what you are proposing (formally knows as “quoting”).

How many new business appointments will you have in the next 120 days?

How many referrals will you ask for in the next 30 days?

How many new people can you meet in the next 30 days?

We can assure you that your results will improve by tracking and acting upon just a couple of leading indicators.  Why not check it out?

The final word, in spite of all the science supporting these concepts, the reliability of your leading indicators must be challenged and adjusted.  Your world, your market, your products, your competition are constantly changing.  And, who are we trying to kid - “…putting a linear process into a non-linear world”?  We keep trying.

Best wishes are flying your way,

Tom

Sales Coach Newsletter is a product of Redmond Group, Inc.  We are specialists in the systematic process of developing and retaining new business.  We design sales and retention process maps and unique measurement tools to track progress to meet business objectives.  We conduct in-house workshops, individual and sales team coaching, Webcasts and assist with product launches.
© 2010 Redmond Group, Inc.

Redmond Group, Inc., 43 Frost Circle, Middletown, NJ 07748
732-957-0005, tom@redmondgroupinc.com