Let’s see how sales quotas could be backfiring and actually hurting your process.
Sales quotas are used to motivate sales people and provide useful metrics for analyzing the sales process. Those are the traditional reasons for using sales quotas–and tradition is the key word here. Sales quotas are as integral to sales as the sales reps themselves, but just because something is tradition doesn’t mean it’s necessarily good for your company today. In fact, sales quotas could be backfiring and actually hurting your process. Let’s see how.
How are your sales quotas chosen? Who creates them?
One of the most common problems with sales quotas is that they’re chosen arbitrarily or out of wishful thinking. Maybe a manager has overheard numbers about what a competitive company is doing, so quotas are created based on that hearsay. Maybe profits are low, and increasing sales quotas seems to be the solution to the problem.
Setting arbitrary high sales quotas might temporarily boost sales, but in all likelihood, that increase will be short-lived because sales reps will quickly become frustrated and disheartened. Consistently failing to reach unreasonable expectations is a sure way to kill motivation in your sales reps.
A positive, team-oriented work culture helps everyone involved to thrive and reach personal goals, but this kind of atmosphere can quickly dissolve under stringent sales quotas. As managers try to enforce unreasonably high sales quotas, tension increases between them and their sales reps. Sales reps blame their stress levels and difficulties on their managers and cease to take their advice and direction. On the other hand, managers feel increased stress as they try to get their reps to meet their quotas, knowing they’ll ultimately be held accountable for the team’s failure to reach outside-imposed goals.
With unreasonable expectations and the tension that comes along with them, reduced revenues and profits will follow. As the sales reps find that there’s no way their can reach their quotas, they begin to find loopholes or ways to manipulate the new system. For example, if they reach their current quota, they may “sandbag” for the next month or quarter. Also, if they know they can’t catch up during the current time, they’ll delay sales to the next month or quarter for a new head start. Once you reach this point, your sales reps’ focus has changed. They’re no longer interested in advancing their own careers by making sales and building their network of contacts; all they’re interested in is getting by.
The “getting by” mentality has a big impact on the overall feel of your company. Even worse, it affects your revenues and the long-term financial health of the company.
When your sales reps have to deal with unreasonably high sales quotas, interpersonal conflicts begin to muddy the water. Sales reps may start to step on one another’s toes, steal prospects and clients, squabble over walk-in customers, and generally make life difficult for one another. Nobody likes to work in such an environment, so you may lose your more successful reps who can find jobs elsewhere.
In short, you have to be very, very careful with sales quotas.
Yes, you want to help your managers and sales reps to set reasonable, career-stretching goals, but you don’t want to squash their motivation or personality along the way. Some firms find that eliminating sales quotas altogether is just what they need to stimulate profits.
Some firms decide that they really do need sales quotas to keep their processes running smoothly. If you take this route, consider incorporating the following three principles into your sales quota philosophy.
Carefully consider your firm’s goals, your reps’ morale, and you current processes as you decide whether to use quotas.
Rhys is a tenacious, top performing Senior Sales Recruiter with 15+ years of focused experience in the Digital Media, Mobile, Software, Technology and B2B verticals. He has a successful track record of headhunting top performing sales candidates for some of the most exciting brands in North America. He is a Certified Recruitment Specialist (CRS) and has expert experience in prospecting new business, client retention/renewals and managing top performing sales and recruitment teams. Rhys enjoys spending quality time with his wife, son, and daughters, BBQing on a hot summer day and tropical vacations.