I know it sounds very much like a cliché, doesn’t it? I couldn’t agree more! However, even in an industry such as direct selling where managements sit on a wealth of data, we come across companies doing no meaningful performance measurements.
All business entities, including direct sales companies, need to measure their progress towards the goals after setting them. “Key performance indicators” or as often they are called “KPIs”, are the means for these measurements. They help an organization understand how its performance is doing against the goals. Some also call them “key success indicators” or “KSIs”.
There are two important characteristics of all KPIs. They have to be:
1) Quantifiable,
2) In the fields that are critical to the business.
The second point is quite significant as this process is about measuring those performances that matter to the company the most, but not everything. This is a trap not so few companies fall into. When the management starts measuring not-so-necessary things, the whole process turns into a chaos. It takes unnecessarily much more management time, ending up with everybody involved questioning the necessity of working with KPIs. It should always be remembered that there are numerous measurable indicators, but not all are “key” to company’s success.
For the measurements and comparisons to be meaningful, the KPIs should not also change on the road unless that change is really required. Consistency allows meaningful period-to-period comparisons, which is a must.
Segmenting the Field and Determining Variables
In a direct selling operation, the indicators that lead to sales success can be first categorized by dividing the field organization into segments such as “new” and “not-so-new” direct sellers, for example.
This segmentation is crucial because most often, different segments behave quite differently. The definitions of these groups (that is, until when you will call a direct seller, “new”, for instance) will depend on the strategic goals and how the company will prefer to see and treat them.
After categorizing the field network, the groups’ performances will need to be measured according to various criteria, each being important to succeed. Examples are: New recruits, order size, number of orders within a given period, repeat purchases, number of home parties, activity rate, attrition, promotions to higher ranks etc.
“Digital” KPIs
For quite sometime now, the whole industry has been evolving through a “digital transformation”. Some companies are well aware of this and actually leading this transformation, some are not even following it. This transformation also requires addition of “digital KPIs” into the picture. So, as the first step, companies need to determine what they want to do and also what they want their field organizations to do on the digital platforms. And then, the performances will have to be measured against them. The process here is very similar to measuring the KPIs in the “offline” world, but the variables are quite different naturally.
KPIs make up an invaluable set of performance management tools. But alongside this, they can also be very effectively used in focusing the whole organization’s attention on areas that really matter to the company. Achieving this can bring efficiency to many areas. And a big plus is the increase to be gained in team spirit and motivation through sharing the targets and the progress with all those who are involved.
In this industry, almost all performance indicators are easily measurable and we have the technology at hand to make those measurements real time. It is a matter of picking the right indicators, defining them well, and consistently measuring… and obviously, stepping in immediately whenever the tendency is not as expected.
If you don’t measure though, how would you manage?
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Hakki Ozmorali is the Founder of WDS Consultancy, a management consulting and online publishing firm in Canada, specialized in providing services to direct selling firms. WDS Consultancy is the publisher of The World of Direct Selling, global industry’s leading weekly online publication since 2010. Hakki is an experienced professional with a strong background in direct sales. His work experiences in direct selling include Country and Regional Manager roles at various multinationals. You can contact Hakki here.
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