Saad Elhalafawy16 Feb 2017From: CSE text bookSMEI-USA

Setting Goals & Managing the Sales Force's performance

Learning objectives:

• Describe how sales managers use goals to guide and control the efforts of their sales forces

• Summarize the elements of an affective goal • Distinguish when different outcomes and behavioral sales goals should be

used• Identify different informational resources available to capture information used

for making effective decisions on goals• Apply goal setting theory in order to improve managerial and motivational

practices

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• Companies rely on their sales forces to generate the revenues they need to stay in business

• Setting and achieving a firm's sales goals is an important responsibility for sales managers, which is considered as their number one challenge

• Goal setting is a powerful sales management activity when it is done correctly• Setting sales goals begins at the corporate level with the study of economic

indicators in key markets• It is the sales manager's responsibility to help ensure that their reps achieve

their respective goals by: • setting clear expectations • help reps develop the needed skill sets and • hold them accountable to reach their goals

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Goal setting

• Sales goal or quota is a performance standard by which sales people, sales reps, and sales managers alike are measured

• Sales people use goals to benchmark or target their own performances within a specified time period. And in most cases they are compensated based on their meeting those goals

• The primary purpose of having sales goals or quotas is to synchronize the direction and efforts of the sales force with the plans developed by a firm‘s top managers

• Goal setting is not just picking target it includes monitoring salespeople, market conditions, and competitors reactions, also instituting & following up corrective actions if they are needed

• Sales managers can use a software to monitor which actions are working and which ones are not and analyze those actions by territory & region

• These actions may include altering the sales messages related to them, focusing on different potential customers, and coaching sales people who need help

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Why are sales goals important to an organization?

• Because most sales representatives work independently and outside the immediate presence of their sales managers so goals need to be in place to help motivate and guide their performance

• Almost 80% of companies will spend 2 months or longer preparing their annual forecasts. the majority will simply use last year's plus a certain percentage model, while about 30% will use external third party data

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Using goals to guide and manage the performance of sales force helps to:

1. Motivating the sales force by having achievable goals 2. Focus and direct the selling efforts of the sales force3. Assess the financial return on the firms investment and its products and

services, as a result the first top managers might need to re-formulate one or several of the marketing mix variables

4. Compare the results achieved by salespeople in different sales territories and regions

Setting goals in Global Sales Management:Coordinating the goals and supporting compensation system that help achieve the business objectives for each unit has recently led to the creation of positions such as Director of Global Sales Incentive Design and the Director of Global Sales Compensation

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Different types of goals or quotas

• Input based goals or activity-based quotas, relate to the observable selling efforts a sales person must make

• Input goals ensure that the reps are performing the firms core selling activities• Use of CRM systems have helped to authenticate activities completed and

improve the validity of those measures• Unfortunately efforts alone don't always produce results that's why out- put goals

are important• Output or outcome based goals are the selling results a salesperson is

expected to achieve including the number of orders, sales volumes and profits• Sales volumes generated has traditionally been the most frequent measure

companies use to set goals for their salespeople, which has the advantage of being easily counted and analyzed, and salespeople understand them. But the disadvantage is that a sole metric may not accurately reflect the entire effort needed to produce the sales or to provide a complete picture of what is being sold

• As a result many organizations will utilize a combination of input and output goals

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• A Pipeline analysis shows how will a sales person is maintaining a stream of customers at different stages in the sales process

• A Dashboard is a visual representation of various performance measures• Expense quotas are used to keep the costs associated with a sales person's

sale in line with what the firm thinks the representative should spend in order to be successful as well as keeping the firms expenses in line

• Sales persons who go over the expense percentages allotted to them usually have to justify why they did it so. however sales people whose expenses fall far short of the percentage allotted them might not be using all of the resources available to them and could possibly be losing sales as a result

• The last step in GOALS analysis is determining which of the goals are more important than others

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Choosing the right metrics and the right time period to track

• Having too many measures made it more difficult to focus on the "critical few" metrics

• "What gets measured gets done. But only metrics that get inspected have any significant impact"

• Most practitioners agree that having more than seven metrics becomes more difficult to manage, and a frustration for those trying to achieve them

• The time period can be a yearly, quarterly, monthly, or even weekly or hourly!

• What about almost meeting a goal?Most companies don't take an all or none approach. A more typical approach is to reward sales people for reaching the 90% mark which is called threshold goal, the 100% mark which is actually goal or 110% more which is stretched goal

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• Should sales people be involved in setting their own goals? About 60% of firm’s tend to include bottom up input in their goal setting. the greater the number of accounts the more likely sales management will use a top down goal allocation approach. The fewer the accounts the more likely sales personnel will be to participate (i.e. the bottom up approach)

• Drawbacks: lowball, easy to achieve. Combination is better with little negotiation

• When a sale is a sale?To take a conservative approach one would count the sale when the product is either shipped or paid for. However this can create a problem for an item with a long sales cycleSome firms will deal with this problem by giving reps partial credit (e.g. 30%) when the order is placed and the remaining credit 70% when the order is shipped

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Should everyone achieve their sales goals?

• Goals should be set with the expectation that sales people will be able to achieve them

• Most companies prefer to have the average target exceed 100% with the expectation that 60 to 70% of the sales force personnel will achieve their goals and 30 to 40% will not

• So why don't more sales people make their goals? Mostly the answer is behind the pool skills or lack of motivation. Also other factors may include:1. Wrong sales projection based on limited marketing research2. Offering higher product prices due to increase in the cost of supplies3. Promotional campaign that don't produce the results projected4. Delays or other problems with the distribution of a firm's products5. New strong competitors enter the marketplace6. Environmental factors that affect customer demand like natural disasters that

cause customers to postpone or cancel their orders7. Change in laws and regulations that prevent or restrict the use of products or

services or make them more expensive8. Changes in the way firms do business for example as a result of the new

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Do goals ever get changed or altered?

• The intent is to set the goal once a year but the reality is that some goals will need to be adjusted. In some cases a company's sales might exceed its expectations as a result the firm will increase its sales goals and the goals its reps must achieve!

• Factors that might contribute to this: if a competitor dropped out, or a change in economic conditions

• If the goals are being Adjusted upward sales people will often feel cheated

• What happens when salespeople don't achieve their sales goals?

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The process of setting good goals

• Goals can truly be a double edged sword!• Researchers found that difficult sales goals alone did not result in unethical

behaviors on the part of a firm sales force. However they certainly helped set the stage for those behaviors

• When sales reps were given exceedingly high goals they often focused primarily on activities that generated more sales and deliver less Customer Service

• All studies yielded 2 consistent findings about the use of goal Setting:A. Difficult goals lead to higher levels of performanceB. Specific difficult goals lead to higher levels of effort than do general

ones

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• Goal setting works because it impacts people performance in 4 ways:

1. Goals direct people's attention and effort toward goal-relevant behaviors and away from other less-relevant behaviors. So they provide focus and direction

2. Goals have an energizing function3. Goals affect persistence4. Goals affect people's of problem-solving skills

• The most important thing about goals is having one• Goals help give you direction focus drive and a sense of accomplishment

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Guidelines that should be followed when setting reps goals

1. Set goals of that are easy for Sales Reps to understand difficult to achieve and have exact deadlines for completion

2. Set an important tasks as a goal otherwise they may be ignored3. Having too many goals can create stress 4. Try to get sales reps to commit to their goals by explaining how they have been

set5. Clearly indicates how the sales performance will be measured and rewarded6. Provide feedback to sales reps as frequently as possible so they know if they

need to redirect or increase their efforts7. Make sure people know you have confidence in their ability to achieve their goals8. Selling efforts typically increases up to a certain point but will decrease as goal

levels increases9. Failing to achieve a goal should not be viewed as failure. it should be considered

progress in the road of success

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Thanks16