Why Does Management Get Setting Annual Sales Targets So Wrong

By | June 5, 2017

One of the major success drivers of sales performance can be measured by the amount of ownership salespeople have for their targets. The logic is inescapable; if salespeople really own their numbers then they will work tirelessly to achieve them. The opposite is also true, if they don’t own the numbers they will spend all their time either trying to get them reduced; blaming the reporting system or working to a lower, unofficial, self-set version they feel to be more realistic.

Many organisations pay lip-service to building ownership through ‘bottom up targeting’. The problem is it’s just that – lip-service. Salespeople are encouraged to analyse their customers and market-place, make careful considered judgments and build their target. This goes in for review and comes back with “It’s OK but needs more work (bigger totals)”.  This cycle can be repeated several times, the salesperson’s cynicism and frustration rising each time. The process only ending when the salespeople have come up with the right figure, or management have finally told them what ‘real’ number is required.

Everybody knows targeting comes round once a year and the need will again be for bigger (or certainly just as demanding) numbers, so why the lateness of starting the process and why the surprise?, because people are in denial, seeing this part of the year as a head banging, remedial, adversarial and motivation sapping few weeks.

The authentic way to engage the salesforce is to tell them in advance the range the numbers have to be within. No less than x, hopefully closer to y and ideally touching z, with the underlying assumptions clearly laid out for testing. The other key requirement is time. It is crass to expect targets/budgets to be built in a matter of days or for a carefully considered piece of work to be considered ‘short’ with the need for a couple more million to be suddenly found by the end of the week.

Salespeople should always be encouraged to focus more on the ‘how’ of the numbers not the ‘what’, because that’s where they will be spending all their time.

The only stretch targets salespeople will own are ones they’ve set themselves. The company’s business plan should be built around the required targeted numbers, stretch should be in addition, and its development and delivery motivated by personal appetite and ambition. Stretch should never be ‘baked into’ the formal numbers by the Finance Department.  As for Super Stretch, we’d perhaps better not even talk about that.

How well do you do set and manage your targeting?

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