especially in a down economy? Is a question that has been frequently discussed since CSO Insights released their 2010 Sales Performance Optimization (SPO) Survey and Analysis report. Despite the steepest decrease in quota attainment observed since CSO Insights started their survey, 85% of the respondents to the 2010 Survey ( data collected late in 2009) said they intended to raise quota for 2010. Already in the 2009 SPO report (data collected in late 2008) a similar amount of respondents planned to raise quota. At that time it was though already evident that the economy had started its nose dive. The decrease it sales performance, measured in quota attainment, in the 2010 report was therefore almost a self fulfilling prophecy.
They had no choice
Is not a cheap excuse at least from sales leaders working for public companies. In many cases it is unfortunately the brutal reality. Sales leaders are prisoners of the mechanics imposed by SARBOX, rules intended to protect share holders’ interests. One of the rules therein stipulates that the revenue target has to be allocated in its entirety to the sales people, becoming their quota.
So if sales leaders are handed down a revenue target from the company leadership, together with the order of a headcount freeze, quotas increase automatically. The same is true even if company leadership factors in the current state of the economy and is setting the target to maintain last year’s level of revenue. Yet in that same year, a reduction in field forces was ordered to protect the bottom line. Then quotas cannot but go up again.
Sales performance measured as quota attainment therefore mechanically gets into a downward spiral. This trend is further exacerbated by the fact that quotas, appearing more and more unattainable, negatively impact the morale of the sales people. As there is also little to nothing done to help salespeople to improve their performance hoping for a recovery of the economy remains the only way out of this asphyxiating spiral. However hope was never a good strategy.
What sales leaders can do to stop the spiral?
First they have to have the courage to ask for a seat at the strategy table where revenue targets are set. To make their voice heard there, they need to be able to speak the strategy lingo They should, second,not be shy to ask for help to learn this lingo. They will then be able to demonstrate to their colleagues the legitimacy of the request for being included in the corporate strategy formulation process. The timing for such a request is also right. The era of shareholder value focus, which mainly determined the current participants in corporate strategy discussions is coming to an end. However, third, they have to act now. Given the often lengthy and laborious budgeting processes, revenue targets for 2011 will be set soon.
Christian: thanks for posting this. I’ve worked with many sales organizations and haven’t found much about quota assignment that I could describe as “empirical.” “Arbitrary” is the most fitting and kind adjective I can assign. And “fair” didn’t make my top 50 list.
Not to steal your thunder, but to underscore the importance of what you have exposed, a blog I wrote on this topic, Higher Sales Quotas Won’t Overcome Bad Risks and Faulty Assumptions.