Effective sales quotas – Every business owner and sales force manager faces the challenge of balancing a number of different priorities in all aspects of their businesses.
One moment they deal with the issue of product development and the next preparing to meet with bankers. Following that will be any number of other pressing issues calling for attention.
Success is often determined by management’s ability to select the most important issues to tackle, not just those seeming to be the most urgent. While there is always a debate about how to set those priorities and which area of business is most important, the reality is that that there is a first among equals on the road to profits and survival. That reality focuses on this issue of sales and revenue. That in turn deals with the effective sales quotas and sales performance management.
The simple fact is that nothing happens in any company until a dollar or revenue is generated by selling a product or service to a customer. Everything else revolves around that essential activity. A company can claim the most innovative and exciting mouse trap the world has ever seen, but if no one buys, it won’t allow a company to maintain its existence. Meeting effective sales quotas are winding the mainspring of any company’s operations.
The art and science of Effective Sales Quotas and sales performance management
Because of the importance of generating a growing base of revenue, companies always focus a great deal of time and effort on building an effective sales force. As the frontline troops, the sales force has to be equipped, trained, motivated and led to win the sales battle. Achieving success in this effort requires a balance of proven scientific factors and the art of identifying, recruiting and leading high performers.
Many of the leading academics have spent time researching the keys to sales quotas definition and developing and motivating effective sales teams. They have introduced to the topic of sales quota definition and sales performance management a number of approaches to technical effective sales quotas development, including:
A recent article in the Harvard Business Review points out some of the challenges in this task and why the fundamental flaw is often the effective sales quotas and performance management process.
The Mixed Goals of Quotas – sales force perspective
Anyone dealing with a sales force understands the individual quota definition is the central component of all sales plans and marketing strategies. How this sales quota is developed plays a key role in determining how effective they are. Another article by Pete Masloski on Frost.com points out how many corporate biases block the establishment of effective sales quotas and incentive plans. He points out that these errors translate directly to the performance of individual sales people.
When quotas are set in a top-down environment, management simply establishes a revenue target, divides it by the number of sales people, and publishes a sales quota. Incentives and sales rewards are then established on this number. While fortunately few companies approach the issue so simplistically, the net effect is often the same. The finance department often views sales incentives as an expense, not a source of additional profits. Product people often wonder why overpaid salespeople need any incentive to sell their wonderful widget.
The simple fact is that individual sales people are human beings who have to be motivated by their self interest. While they may have an interest in their company’s long-term success, the actual effort to make one more sale will be motivated by how it directly benefits them. That motivation comes from the incentives in place to both motivate and reward the level of performance the company needs to meet its objectives.
Getting the most from sales force management
Successful managers understand that those few activities undertaken each year are less important than sales quotas and the compensation plans that back them up. We recommend taking time to focus on truly effective sales quotas definition, sales incentives and sales contests. Effective sales incentives always provide an ROI that will produce the desired top line corporate revenue numbers.
Effective sales incentives provide an ROI that will produce the desired top line corporate revenue numbers
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