Here is the dirty little secret in the sales industry – sales quotas across the board are going up and sale rep quota attainment is going down.  I asked my friends over at the Service Coach to share their thoughts on this alarming trend and why it’s happening. Here’s the low-down, no frills, no BS take on some ugly, ugly data.
Guest post by Steve Teneriello of the Service Coach Blog
I’ve never had a quota that went down and from the board room to the front lines here is some insight from my experience as to why quotas are going up while quota attainment is going down:
- Organizations are modeling their business after top performers. Talent is not scalable.  As a result average B players who were hitting goals are now stretching and working beyond capacity to hit unrealistic goals. They burn out, leave and you’re stuck filling a seat in a cube.
- Baptism by fire – no training, continuing education or product knowledge programs. Here’s a phone and your territory. Good luck.
- Executives do not understand the mindset of a sales rep. Reps love carrots and many small wins turn into big ones. There is a lot to say about the power of momentum in sales.
- One size fits all approach. Remove your best players from the pack and give them the stretch goals and pay them a premium for high achievement.
- Organizations (especially) newly funded companies scale headcount to numbers in a spreadsheet dictated from their board. Often accelerating headcount means you may be stuck with a bunch of C players who interviewed well but cannot execute. By the time you figure out the problem you’ll be on your 3rd VP of Sales.
- Managers are not fast enough to replace underperforming reps
- Managers do not understand unit economics
- Rookies and subpar players inflate pipelines and forecast deals that have no chance of closing. Executives run pipeline reports and see all of that low hanging fruit. From their ivory tower they summon a brand new sales manager who was once a top performer and he’s expected to close all of those bogus opportunities.
- Managers are consumed with on boarding new reps and lose focus of pipeline management. They shift focus the last week of the month and put pressure on performance hence the hockey stick many organizations see at the end of the month.
- Quotas should be backed up by averages of your B players =
Now that you know the dirty little secret of sales, we’d love to hear your take on why rep quota attainment is going down, while sales quotas are going up across the board. Seriously, don’t hold back… let it rip!
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Well there are great sales people and there are really great sales people. The really great sales people look at the long term ROI on deals: will the client stay, will they renew, what are their long term needs, do they flip vendors alot? They also know that by being upfront and building relationships they will build a pipeline of referrals – because decision makers change jobs and people change jobs to become decision makers – and they will remember the good guy. The great sales people are great at closing deals – but they are great closers – not great relationship builders. They go fast and hard and they close – and sales quotas are modeled after them. But nobody seems to go back and vet out which clients signed up and left. Was it the B players or the A players that signed them up? When I worked at Citi I followed an A player AND a long line of pissed off clients that were pissed off because they were not getting what was promised: they got a good pitched, signed up and then were looking for the escape hatch.
I really liked your post. I was tired of working with people who just talked the talk but no matter what they SAID – they were not really truly worried about the long term experience of the client. And that is unfortunate because when you factor in the cost of acquisition it's often costly to deal with what Mr. A Player brings in. Often Mr. B Player who actually cares and is passionate about the job/industry gets wrapped up in customer services and is thus penalized.
Hello Chad, Nice post! I am working on a post about your question. Basically, are salespeople "anti-social" in 21st century business? All these great relationships are being formed through social outreach, only to have aggressive salespeople who are only interested if you want to sign now, and barrage you with a host of anti-social questions to "qualify" you. Businesses are losing long-term prospects with this antiquated sales approach. The model has to change.
Steve/Chad,
I think the biggest challenge to quota achievement is not internal, but external: the prospective customer. The buying process is being dramatically impacted by access to social networks and information (i.e. the Internet), and that raises the bar on sales performance. Cold calling and email blasts become ineffective, and need to be replaced with more targeted outreaches and the ability to effectively engage. We all need to adjust to Customer 2.0.
Interesting post.
I have noticed a few consistencies in the 15 years that I have been working with sales organizations.
1. Top level executives seldom involve the sales team when determining quotas and objectives. They (the executive) may 'think" they can achieve a certain level of sales but without buy-in from the people who actually generate those sales, they are destined for failure.
2. Most companies fall prey to the 80/20 rule. Eighty percent of the sales are generated by the top twenty percent of sales reps. This speaks to your first point.
3. Training continues to drop. Although many companies provide product training for their reps, very few actually help their team learn how to sell more effectively. They assume that because a rep has XX number of years of industry experience, that they are qualified to sell. However, the marketplace has changed and reps need to adapt their approach and improve their skill accordingly.
Very intriguing topic we have here, sales quotas (growth/targets whichever concept suits the organisation) Sales quotas are revenues the business requires in order to cover overheads, repay banks, pay salaries etc etc.
I agree with most of what has been posted here, some great insight.
One of the most mind boggling facets about quotas is why companies see growth only as new customers!!! Or to be more politically correct increase market share (a term prevalent in the mobile and telecomms markets)
What about exisiting customers??? I know from experience that existing customers can provide more revenue, unfortunately, with pressure to bring in more revenue sales people chase new business and sadly neglect existing ones,,,,,disaster!!! (Does anyone remember GAP analysis)
Market share is volume driven, and sadly comes with price regression and declining revenues. If you have 10% market share and generate a million pounds revenue with pre tax profits of half million, increasing your share to 20% wont bring the same % in revenue and profit, it never does.There are many present day examples of this, and yet companies still insist on increasing new business and raising the targets for people to achieve.
I recall my own experiences of quotas whilst employed by a large US corporation based in the UK. I had 30% less customers than any of my colleagues yet managed to hit annual revenues and indeed exceed target by 11 – 27%. The simple method was working with the customers i had developed, i knew their business plans and so incorporated them into my own (to back this up i polled on LinkedIN last year the % of people who knew what their customer(s) business plans where – the figure was less than 10%) my forecasting was accurate and production capabilities were maximised (this improved operational profitability). The unfortunate downside was that the company looked to fill gaps by using that strategy by insisting if i increased the number of customers then the revenue and profit will increase also, it didnt work and the company lost a contract with revenues of 11 million pounds a year!!!!
I am not sure i am with the recent developments of Sales 2.0, customer care 2.0, Web 2.0 etc etc they all have relevance to a vastly changing global market place, but i believe the one thing which is important that may be being looked over somewhat is value. Every business has and objective or a reason for existance, they provide a service or product, that was why they where formed in the 1st place, the end result of providing this product or service, revenue (profit/money). I worked for a large company recently whose sole sales function was new business only, needless to say the team i coached needed to sell well over their budgets in order to neutralise the loses of existing business. At its peak, for every new client won 2 where lost, not every win matched the lost revenue, i will leave you with your own visions/images of what happened next!!!
My challenge is simple, what organisation actually understands the needs of its customer base, what plans it has for its own growth and revenues. i know a lot of organsisations who say they know, but in reality it is their own asuumptions or their own perspective, invest in your customers (listening, partnering, understanding) as well as investing in your own development. Just to close i also polled last year how many companies had interacted with their customer base and asked questions of value, innovation, growth and expectations, less than 5% had done this and of that 5% they only contacted last than 50% or so of their client base.
It seems everybody is trying to re-invent the wheel!!!
Best wishes
Nice post, Chad.
My skinny take? We have, here, a classic 'tragedy of the commons'. Everyone's doing what they can to incrementally fix a known problem, but their fixes are only making the problem worse. IMO, until it's much clearer where the root causes of quota attainment lie, we're going to continue to see things get worse before they improve.
Today's data used to manage sales teams to quota achievement are activity-based (how hard are you trying?), and effort-inducing. Not making quota? Try harder. What's needed are data based on Return-on-Effort (how much buyer impact are your efforts having?), and improvement triggering. Until then, the future's not pretty.
Trust this adds some value. – John
I can tell from most of the responses that not many have ever been in the position of sales senior management. After 20 years in the technology sales business let me give you an equation.
Last year the business did 175M
This year the business needs 200M
CEO rolls 200M goal to 8 VP's.
200M divided by 8 VP's marked up 20% = 30M each ( 240M total )
30M divided by 4 managers per VP marked up 20% = 9M each ( 288M total )
9M divided by 4 sales people marked up 20% = 2.7M each ( 345M total)
So the equation is the business needs 200M but by the time it is marked up at each level there is 345M dollars of quota assigned out. Because the goals are so overinflated only the top 10% ever have a chance. The next 30% will achieve in the 70 percentile range. The next 25% will be around 50% of goal and the bottom 25% will just be yelled at every monday.
It boils down to every level the goal goes down hill it gets padded.
That's why goals are increasing.
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