Truth be known, most quotas are set by the company president, CFO or sales manager sitting in a room, deciding on what revenue growth they want and backing into the numbers.
It seldom has anything to do with what's possible, how marketing can help, a sales or marketing plan or whether they should hire new sales reps to bring in the increased volume. It's pure wishful thinking based on nothing more than they want it to happen.
The consequences are devastating.
The first sign of unrealistic quotas occurs when top salespeople who made past quotas struggle. Within a few months, these reps’ quota performance starts to dip below 70%, and heads south. When questioned, the salespeople say the quotas are too high, among other things, but management dismisses this as typical sales grunt grumbling.
A few more months pass and the numbers aren’t looking good. The forecast is in the toilet, products are not being sold, and inventory is building. Still management has its head where the sun doesn’t shine, and nobody has the guts to admit that a few months ago, at the beginning of the year when new quotas came out, requirements were too high.
“It will be easy to sell the new product,” said the head of engineering. “We’ve priced it just right,” said Marketing. The sales manager said, “It fits in with other products and should be an easy sell.” But no one asked the salespeople.
The salespeople are used to being dumped on, so when new quotas came out they begrudgingly accepted them (not that they had a choice).
When asked, the top salesperson said, “We can sell it, but the volume they want isn’t realistic. Don’t they do any research to know how many buyers I probably have in my territory? My attitude is screw it, I can only do what I can do; threats and loud voices at sales meeting don’t motivate me.”
A Salesperson's Response
"My attitude is screw it, I can only do what I can do; threats and loud voices at sales meeting don’t motivate me.”
Other salespeople typically say, “They add to my quota, but never take anything away. Don’t they know I have only so many hours in a day? It’s like asking a guy in manufacturing to go from punching out 500 products a day on a machine to 650. It isn’t going to happen unless something else changes.”
And so it goes. When salespeople see the top dog struggling and management is increasing the pressure without support (sales leads), a great new opportunity turns into a demotivation engine. Ever try to whip a donkey into moving?
Unrealistic Quotas Have Consequences
- When few make quota, few make bonus. Not a good thing. Hugely demotivating. Try having YOUR salary reduced for six months because you couldn’t work fast enough.
- Sales territory turnover goes up. No one likes to be a loser or play on a losing team. If they aren’t fired for not making quota, they leave anyway.
- Sales expenses jump. Travel increases, discounting is common, and open territories lie fallow.
- The coach gets fired. Sales management tenure is said to be less than two years. Unrealistic quotas for salespeople mean unrealistic quotas for sales management.
- Margins slide. When sales falter, margins falter as Marketing makes offers that cut into the profit margin. The CFO isn’t pleased. The company president is less pleased than the CFO, and the board of directors suggests maybe the salespeople need training. They are all wrong; it isn’t training. Training is a fool’s illusion.
Have the Courage to Recalibrate
Go to the salespeople and ask what they can realistically sell. Ask them what support they need. Adjust their quotas and generate qualified leads to help them close the business. Don’t resort to discounting; that’s for wimps who don’t know how to sell.
This is one of the 56 reasons companies fail to reach quota in the article: How to Turn Around Failing Sales.