SETTING SALES QUOTAS – AN ART, A SCIENCE OR PURE GUESSWORK?
When Albert Einstein coined this month’s quote he must have been thinking about the process of setting sales quotas or budgets or targets. Experience shows that imagination far outweighs knowledge as far as this subject is concerned, and probably accounts for the fact that the number one reason why good sales people leave is unrealistic targeting.
Unrealistic sales targeting is demotivational, margin eroding and a bad use of company resources. In most companies sales people are the most accountable of any employees as they are generally the only ones who have measurable business objectives. However, while the sales targets are for the sales team, everyone in the company has a role in achieving them and should carry some meaurable objectives. For example, how many marketers have a specific objective for bringing in sales ready leads? How many product developers have an objective related to the number of new product introductions? How many support staff have a specific customer satisfaction rating objective? How many managers and directors have SMART (Specific, Measurable, Actionable, Realistic and Time based) customer and market focused objectives?
Unrealistic targeting is brought about by five factors:
1. Blind ambition – a stretch too far
2. A lack of market and customer knowledge by senior management
3. Sales management who load individual sales targets with “cover” to look after their own interests
4. Lack of organisational alignment, and
5. A general misunderstanding of sales people and selling in general.
Setting sales targets is more than saying “We did £5milion last year and grew 10%, so let’s go for 15% this year”. If this is the wrong way, what is the right way?
Like the answer to most business problems there is no single right way but there is a common starting point and that is to have a vision which spans years rather than months and into which the whole board and management group is committed.
Such a vision might be “We will double sales by 2018”. The first step is to establish the baseline. This is normally the previous year’s, or if you are planning ahead the current year’s forecasted performance. Were there any market discontinuities, e.g. legislation or regulation that caused unusual and/or unrepeatable growth? If so adjust the baseline accordingly.
The next step is not to dish out this year’s target of baseline plus n% growth, you never know it may be too little. Rather it is to say, “what are the top level customer focused actions the company has to take to achieve this, what are their outcomes, who is responsible for each action and by when will we achieve them”? These actions must be board and senior management led and owned and be companywide . If you have no marketing or product development actions perhaps there are other questions to be asked! If you have no actions coming to fruition this year, you are doing nothing different to last year so why should achieve anything better, or worse than market or customer planned growth?
So baseline plus time lined outcomes equals this year’s overall sales target.
The next phase is to cascade the target and actions down the company so that each department can do their part of the actions, can see their contribution and every individual can receive and accept their objectives in support of the of overall sales target. These objectives should be just as SMART and accountable as those of their sales colleagues. The key to success though is not the process as described here, that’s just common sense, it is in the motivation of all the people in the company. The biggest motivator is trust; engage your people, bring them into the process, trust them to give an honest assessment of their contribution to the plan and link rewards to achievement.
If a company adopts this overall approach not only will they set realistic sales targets, they will have the active support of the whole company, engender sales and customer focus and achieve competitive advantage.