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Sales Quotas, A Thing Of The Past?

by David Brock on May 15th, 2017

Recently read a provocative post declaring “Sales Quotas A Thing Of The Past!”  For the most part, the article was a tutorial on pipeline metrics and a diatribe against much of the quota setting process.

I don’t disagree with a large part of the article.  Much of the way sales quotas and goals are set is wrong.  Too often, we see manager setting goals that are arbitrary or not based on sound analysis.

This isn’t just the quota, but it’s a majority of metrics that sales people are subjected to, including meaningless call metrics, activity metrics, pipeline coverage metrics–all that bear little or no relationship to the goals that actually need to be achieved.

Quota’s are often set in the same haphazard manner, “We did this last year, so we need to do much more this year……”  “We need to manage the sales expense, if we set the quotas in this way, it will minimize commission dollars….”  “We need to achieve this much growth in the coming year.”

There’s a lot wrong with the way quotas and goals are set.

But is the answer throwing these out?  Or is it fixing the process by which we establish goals?

Throwing these out certainly gets the votes of approval for those that fail to make their quotas, for those who don’t want to be accountable, and for those who just don’t understand business.  Suggesting metrics around revenue generation be abandoned, generates a lot of hype, but is really meaningless and misleading from a business management point of view.

Also, much of the argument looks at sales in isolation, but not at sales role in the enterprise and helping the enterprise achieve its goals.

Unfortunately, sorting through this means getting to the basics of business—all business profit or not for profit.

A business exists to achieve goals.  It does this through providing innovative products/services that it’s customers want to buy.  It attracts investment from companies that believe the business can achieve its goals, grow, and provide a reasonable return on the investment (whether in the public or private markets).  Top executives are held accountable for achieving goals, generally measured in terms of growth, profitability, revenue, and sometimes other factors, even social contribution.

In developing the business plan, the goals are parsed out to the different parts of the organization based on their responsibilities.  For example, product development is accountable for developing products according to a certain timeframe, to achieve certain goals, often measured in revenue generation, market share, growth, and so forth.  Likewise, manufacturing has certain goal, it has to build quality products, meeting cost, delivery, and a number of other criteria.  Go through every part of the organization, and you will find each function and every individual has goals that, in some way, tie to the overall corporate goals (both tactical and strategic.)

Sales is no different.  Since sales is accountable for executing the corporate strategy in the face of customers, sales has its own set of goals, including revenue, growth, share, mix, customer sat, and any number of other things.

Clearly, each part of the organization is dependent on the other to achieve their goals, and only when all work together effectively, will the enterprise achieve its goals.

If  product development misses a major new product launch, the impact of that ripples through to all parts of the organization–manufacturing may have built new assembly lines or entered into agreements with suppliers, customer service may have invested in putting capacity in place that will now be wasted, and sales will miss the ability to generate revenue for that product–part of their total quota–inevitably causing sales to miss its quota.

Likewise, when sales fails to deliver on its commitments, the ripple effect impacts all parts of the organization.  Manufacturing may have excess capacity and inventory, missing its goals.  Margins from sales that were earmarked for product development dry up, forcing vital projects to be cancelled.  Capital investments may have to be postponed, downsizing happens, people lose jobs.

Sales does not exist in a world by itself.  The rest of the organization depends on sales achieving its goals, so they may execute and achieve their own (which in turn enables sales to achieve its goals).

It all has to work together or it doesn’t work at all.  That’s just business 101.

Each part of the organization has its goals (or quotas, if you will—and many of those functions refer to their goals as quotas).

Layer some other expectations on top of that.  For example, we are expected to continually improve.  Designers are expected to improve design productivity, manufacturers are expected to improve manufacturing productivity, and sales is expected to improve it’s own productivity.

So through both growth and continued productivity improvements, we continue to expect increases changes in our goals.  Growth suggests adding additional capacity to meet growth goals, productivity improvements offset some of that capacity increase by improved methods/etc in the way each of us do our jobs.

Again, all of this is basic business and economics.

I feel a little like Michael Douglas in “Wall Street,”  Goals are good!  Quota is good!  Without these the economy doesn’t work.  We achieve nothing by trying hard and settling for what we get.

It’s ironic that pundits argue there should be no revenue quotas and goals, when the fundamental job of sales is to help our customers achieve their revenue targets and goals.

Yes, too often, goals are mis-set.  There is no connection to reality–that is the goals of the enterprise.

But that’s bad management, whether on the part of sales or the part of others in the enterprise.  Not being able to tie the goals we have in sales (or any other function) to the overall goals of the enterprise is a management failure.

Yes, there are clueless or unreasonable productivity expectations.  To arbitrarily set goals that have no connection to real productivity numbers is just setting the organization up for failure.

Yes, there are terrible management practices, in sales and the rest of the organization that let this goal setting process get out of hand with too many games being played on each side.  And this leads to failure in goal attainment.

But when you take a broader view, it’s a self correcting problem.  Bad management, setting inappropriate goals, fail to achieve their goals.  When they consistently fail to achieve these goals, they are replaced or the organization fails—in any case it is self correcting (not without sometimes terrible consequences.)

Yes, it creates a lot of “likes” and grabs attention to say, “Eliminate Quotas, Eliminate Revenue Goals……”

But it’s simply bad business.  It draws attention from the real problems and challenges.  Let’s focus on management and establishing meaningful goals in the first place.

Let’s focus on management, making sure the right people are in place, that they have the right training, tools, systems, processes, programs, and coaching to achieve those goals.

Afterall, isn’t that what high performing businesses do?

 

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