CSO Insights Blog Posts
What We Have Here Is a Failure...or Do We?
Our data demonstrate each year how much room there is to improve in sales. Percentage of reps meeting/exceeding quota has risen above 60% once in the past 6 years (61% in 2008). How does this level of performance persist and is there anything to be done to improve the situation? Or, is it a situation that needs improving?
In some ways these questions remind me of a bird and a fish each describing a boat (I like this so much better than the overused three blind men describing an elephant). While each would be telling their "truth" about what they were looking at, their descriptions (the hull underwater versus the deck and cabin above the surface) would be remarkably different. Sales managers are challenged with how to raise their reps' performance when they are not meeting/beating quota-this isn't news. What was news to me was the reaction of compensation managers when I presented these figures to a group of them last year: "Less than 60%? Yep, that sounds about right."
I could not believe what I was hearing but their "truth" was that this was exactly the basis of their comp plan designs. They were not predicated upon, say, 90% of reps making their number. In fact, were this level of achievement to be realized, it would completely blow their budgets and either comp plans would have to be modified (i.e., commissions lowered) and/or quotas raised. So, is this a problem needing to be solved or simply a problem with perception?
If ever there was a situation where the Cool Hand Luke line ("What we have here is a failure to communicate") applies, this would seem to be it. But what is not being properly communicated? If the expectation is that 100% of reps should achieve plan, then the perception will be that the sales team (reps and managers) are falling short (i.e., underperforming). If the expectation is that every rep should be able to achieve plan, then the test becomes whether quotas are fairly set, products/services are appropriate to the market, and sales tools and knowledge are reasonably accessible.
Quota setting and territory assignment have become increasingly complex as alternate channels (e.g., partners, OEMs, eCommerce) have entered the mix. Further, sales organizations have become more complex with product specialists, industry and/or major account overlays, and other layers of roles and responsibilities have been added. We are exploring these issues and best practices in our current Sales Compensation/Performance Management survey. (To take the survey now click here: Sales Compensation/Performance Management Survey )
The report will be released early next month and respondents completing the survey will receive the report for free. However for now, there are two immediate conversations that sales management should be having. First, with the management team to understand and clearly agree upon performance expectations: deliver revenue, yes; 100% of reps making plan, no. Second, with each sales rep to identify what resources are available or still needed, and which sales skill if improved would have the highest payoff for the individual-and, hence, the company.
Every rep should believe he/she has a solid shot at being successful. If it turns out each one is, then either the size of the company's revenues will have to far exceed plan, or the size of the sales force will need to scale down to fit budget. Percentage of reps meeting/beating quota remains a useful metric-particularly when comparing a broad spectrum of companies-but it shouldn't be used as the sole measure of whether sales reps and their managers are doing their job.