Four Steps to Creating Sales Targets that Drive Results
During the fall quarter, most companies start focusing on how they will close their year (in terms of revenue and gross profit) as well as beginning the process of updating their sales (revenue) targets for the following year. It’s also the time that management drops the “stretch-goals” bomb or what one mentor of mine used to like to call “BHAG” sales target (Big-Hairy-Audacious-Goal). Although I am in favor of pushing the limits of my team, these stretch-goal methodologies rarely work as designed and because they are structured as “win big or lose big”, in most cases have a real demotivating effect on your teams and organization. Focusing on these four areas will lead you to better results, more consistent targeting, and a team that is motivated for the long run.
- Once you have abandoned your stretch goal mentality, look at the current state of your business and define your desired sales/revenue outcome based on this knowledge. Yes, this is much harder than saying, “my boss says to grow by 30%”, but the deep understanding of you current state will lead your organization stop focusing on the numbers to achieve and start focusing on the process of achievement. This is the hardest and most detailed step.
- Once you have established the current state and desired outcome; break up these revenue/sales numbers and the process to get them into small chunks. By doing this, you establish a pattern of smaller wins / process goal attainment. In the end, you will have developed a culture of winning and/or adjustment instead of an “all or nothing” mentality.
- Now build in a system that rewards superior behavior and discourages falling short. I am not talking out of both sides of my mouth here and this is why. You will still have the over-achievers….they need to feel fairly treated for being better than average. You will have folks who fall short…they need redirection and course correction (maybe even managed out of the business). Remembering that since these are “small chunks” your team never gets too far behind before a correction can occur and your top performers are still treated as stars.
- Lastly, develop a culture of “adjustment”, both up and down. Most teams are used to a big target at the beginning of the year that never adjusts….you win or you lose….and so does your company. I think we all know the reality is that in the current economic environment, it’s not that simple. Having the ability to adjust as your “knowledge of the current state” becomes definite allows you to throttle up when you can and down when you have to.
One word of caution, if you try this approach you need to commit all the way. A half attempt at this would be disastrous. You need to commit to change in order to change your culture and to get the results that you want. One last thing, if you are like me, you are now saying to yourself, “that’s all well and good, but my external stakeholders (lenders, principles, shareholders, managers, etc.) aren’t sympathetic to this type of curved lined forecasting”. I get that too. The answer is simple. Once have your current state defined and your desired outcomes articulated, take a conservative approach to this forecast and decide whether it is good enough for your external stakeholders. If it is, you have your worst case scenario that should only be effected by upside surprises. If it’s not, no hoping or praying for you to achieve your stretch goals is going to make it any prettier in the long run. Make the strategic adjustments now and be better off at the end of the year.