“I ignore the quota,” Theresa the salesperson said. “No one loses their job here if we don’t make the numbers, which are totally unrealistic anyway.”
Steve piped up, “We don’t worry about the quota; it’s a yearly number and no one tracks it.”
Amad said, “Yeah, they give us quotas, but the sales managers don’t have the same numbers, and the systems engineers aren’t on the same system; so no one gets punished but us.”
To top it off, a really anxious saleswoman by the name of Sylvia said, “Our company president sets the quotas every year; the sales manager doesn’t have much to say about it. No one pays attention.”
And so on, and so on. This occurred in a single gap analysis meeting with salespeople at a high-tech company that was not making its numbers. When the revenue isn’t hitting forecast, there is more to it than training the reps (few need it), competitive offers (there are always competitors), or product failures (seldom valid). To understand the revenue failure issue, as a consultant I had to start with the people closest to the issue and then spread out to policies, procedures, tool use, and marketing lead generation.
Quotas can be by dollar, by product, and by sales activity; often by all three. Quotas have several functions:
- Insurance to make the top number for the company,
- A performance measurement for salespeople—a bar that must be reached so management can fire the poor performers,
- A motivation to create super achievers to make up for those who fall short,
- A way to ensure the timely flow of revenue to support the rest of the employees.
In my years of sales management and sales consulting I have found the following four reasons for sales failure in many companies.
Today, I am sharing the four common issues for Quota Failure:
- Companies do not have monthly, quarterly and yearly quotas.
If you do not have individual monthly, quarterly and yearly sales quotas you are not running a sales organization, you are running a lottery. Set monthly and quarterly achievement quotas and watch sales increase within three months; within six months you will be surprised at the change in achievement. All good salespeople keep track of their achievements and need to know how they are being measured. If you aren’t doing this now, you can expect some resignations; those who don’t like being held accountable (usually those not making quota) will quit. When you think about it, this won’t be a loss but a win.
Why it Matters:
“If you do not have individual monthly, quarterly and yearly sales quotas you are not running a sales organization you are running a lottery.”
- Quota achievement isn’t reported monthly.
If a salesperson doesn't know where they stand on quota achievement for the month, how will they know if they are ahead or behind? Too many companies are slow to report or only do it quarterly. I think the issue lies with the accounting department, which dislikes doing this work. Report their performance achievements monthly, if not more often.
- Quotas are unrealistic.
Is the sales incentive bar set too high? If you have set sales quotas too high (when fewer than 70% make quota year to year), you have to tell the quota-setting executive that quotas are set too high and are not motivating; they are performance killers. Setting stretch quotas (10-15% higher than what you really need) is a prudent tactic, but 30-50% stretch goals each year are unrealistic and demoralizing.
Why it Matters
“Remember, a pipeline is managed by fearful, insecure salespeople reporting to optimistic sales managers, and both deal with selfish prospects who lie.”
- The Canary in the Coal Mine: Do you have an honest sales pipeline you can count on?
Your sales forecast (AKA sales pipeline) is the first indicator of failing sales and therefore quota failures; it is a very reliable indicator of the future. When sales falter you need the most accurate forecast, not salespeople covering their backsides because prospects have:
- Stopped returning calls
- Postponed the deal far into the future
- Suddenly run into budget issues
- Misled or lied to the salesperson because they don’t know how to say the situation has changed
The pipeline is the first indication of failure (the canary is dead on the bottom of the cage), and this starts happening a month or two ahead of severe drops in sales. Remember, a pipeline is managed by fearful, insecure salespeople reporting to optimistic sales managers, and both deal with selfish prospects who lie. The first indications of a gasping canary is when deals are pushed, new deals are not put on the forecast for closing in 30-60 days, and salespeople, during sales meetings, talk long and loud about what prospects say without commitments. In other words, if I talk loud and long enough that is a good enough excuse for failure.
To counteract this, get the pipeline and the people who control it, the salespeople, to be painfully truthful and you will solve many issues. You must insist on the truth from salespeople, not overly optimistic estimates. Create policies for retaining only serious buyers on the pipeline. Don’t embarrass or harass salespeople about their pipeline; help them build it.
Of course, these aren’t the only issues with quotas and quota achievement, but address these four issues and you’ll fix the majority of quota failures.These are four of 56 reasons sales could be failing as outlined in a white paper written by James Obermayer. Go here for How to Tell if Your Pipeline is Failing You: A CEO’s Guide.