Thinking About Sales Performance — That Is Sales Management Incompetence

I’m a huge fan of the research done by the folks at CSO Insights.  They are very gracious in sharing their research with me—Thank you!

I was just reading their newly released 2018-2019 Sales Performance Report.  The very first set of data, in a packed report, fascinated me.  It was a comparison of Plan vs Quota Attainment:

Some quick explanatory notes.  The Performance Levels represent the “bell curve” of sales organizational performance.  Performance Level 1 represents 20.8% of organizations, Performance Level 2–50.3%, Performance Level 3–28.9%.  (CSO Insights has a much richer categorization than I’ve highlighted–look at the study.)

There are a few striking things in this data that cause me to reflect.  Some of this is wild-assed guessing, but probably worth thinking about, in looking at our own organizations.

First are the relatively small differences in overall plan attainment between top and bottom performing organizations.  They are separated by only about 2.1%–perhaps within the range of survey error, which means there is relatively little difference between top and bottom performers in meeting plan.  What’s this mean?

First, plan is a relatively arbitrary number, particularly when comparing performance across firms.  Understanding plan performance and YOY growth would provide some better insight in comparing organizations and looking at performance.  For example, an organization that is keeping a flat plan, versus an organization growing double digits are very different.  Some organizations set very modest plans, some have a philosophy around BHAG’s.*

But what’s interesting is the majority of organizations are coming very close to meeting their own expectations on plan attainment.

Now, we start looking at the gap between plan and quota attainment—or, perhaps more correctly, the chasm.  Here, the contrasts are sharp–both between low to high performing organizations, and the gap in their own plan attainment.

Before I go further, there is a bit of a disclaimer.  Quota is also an arbitrary number.  Quota development and allocation is still probably more of an art than science.  Virtually every sales executive over-assigns quota.  The reasoning being, “not all my people will achieve quota, so I need to over-assign by a certain amount to assure I meet plan.”  I’ve seen over-assignment numbers that are all over the place.  When I ran large organizations, I tended to over-assign by about 10-15%.  That is, if I looked at the total quota assignment, it was about 15% over my plan goal.  I’ve seen some organizations with extreme approaches with quota over-assignment approaching 100%—which is only an indicator of how pathetic/lazy sales management is.

Again, organizations have various strategies around quota over-assignment, I”ve heard some rules of thumb around “Assume 75% will make or exceed their plan.”

With that as a disclaimer, some observations:

1. It is difficult to compare relative performance across organizations unless you understand their goal setting philosophy and balance these comparisons.
2. But there are sharp contrasts in quota attainment between high, medium, and low performing organizations.  This is less a reflection on the sales people but more on management performance—more later.
3. Within each category, there is a huge opportunity for improving quota performance.  Even the Level 3 companies only have 60.3% of their people making or exceeding their quotas.

But what’s really stunning about the data is, particularly for Level 1 organizations is what it says about gross management incompetence!

Think about it for a moment.  Level 1 companies are coming very close to making their plans—and they are doing this with only 45.8% of their people making or exceeding their goals.  This is total irresponsibility and cluelessness on the part of sales management.  What it indicates is these organizations are grossly overspending in sales expense—impacting overall company profitability, or greatly underperforming the market potential  (i.e. their plans are set far lower than they should be).

Let me dive into this a little more–explaining myself.  If an organization can come close to meeting their plan with 46% of their people achieving their quotas, then they are grossly overspending on the other 54%.  They have the opportunity to dramatically reduce their spending and achieve the same goals—if they are doing their jobs as managers.  Let’s call this “the glass is half empty” philosophy.  This is a good strategy if you are in low/no growth markets and have relatively high share.

Another way to look at this is–what if we can get more of that 54% making their goals–we could dramatically overachieve our plans and grow much more/faster.  Let’s call this “the glass is half full” philosophy.  If I were an investor or shareholder–I’d be more focused on this strategy.

Again, with the caveat that quota assignment methodology impacts how one looks at this data, across the board, there is huge room for improvement in sales performance.

Too often we think the key issue with sales performance is the sales people—the bigger issue is in sales performance is gross sales management non performance.  It is stunning to me, that the majority of companies in this survey are coming very close to meeting their plans, but with very poor performance to quota!

Focusing on sales people will not do anything until sales managers start doing their jobs.  Stated differently, if we don’t have top performing sales managers doing outstanding jobs at sales management, we can never expect our sales people to perform at the highest levels possible.  After all, we if we aren’t hiring the right people, if we aren’t setting the right expectations, if we aren’t putting the strategies, processes, programs, systems, tools, training and support in place–sales people will never perform to their full potential.  If we aren’t coaching them, they won’t grow, develop and improve performance.  If we aren’t addressing performance issues, we won’t achieve our goals.

Instead of doing these things, it looks like managers are just throwing more money at the problem—this is only irresponsible business management.

In fairness to sales managers, this is not just a sales management problem, it’s a corporate management issue.

Corporate executives need to be paying attention to this data–and too often they aren’t.  Corporate executives must invest in their sales management teams–putting the right people in place, not just getting who they can recruit or promoting a top sales person into a management role.  They must invest in training and developing sales managers, at all levels.  Sales managers have to be stewards of good business management, within the sales function.  Without the right coaching, development, and support from top management, too often they don’t know what they should be doing or how to do it.

We have a crisis in sales performance.  This crisis starts with sales management, but won’t be solved solely by sales management.

But we have to stop talking about it, we have to start doing something about it–for our investors, shareholders, employees, and customers.

*BHAGs are Big Hairy Audacious Goals, supposedly proposed in Built To Last by Collins and Portas.  I first came across it in the late ’80s though TJ Rodgers, then CEO of Cypress Semiconductor.