Over the past four years, sales quotas have risen nearly 33 percent, yet the percentage of representatives making their quota has fallen by 25 percent: A bad omen for companies, and perhaps a worse omen for the reps that depend on their sales to earn their keep.
The statistics come from The Bridge Group, a sales strategy firm based in Hudson, Massachusetts. The report also found that on average, only about 50 percent of sales reps made their quota, and more than 42 percent of companies reported that less than 50 percent of reps were meeting or exceeding their quota.
"It's mind-boggling," says Chad Levitt, a sales consultant and account executive with HubSpot who authors the popular New Sales Economy blog.
But who is to blame, and perhaps more importantly, what can entrepreneurs and CEOs do to make sure their reps don't fall into a rut? "The first thing you should look for when a rep misses a quota is if there's a sales process in place," says Levitt. "Most companies let the reps fly by night...and many times the rep is hung out to dry."
A sales process, or a sales funnel, is the perhaps the most common way to get your reps on track. But setting fair quotas, and figuring out how to react when a rep misses a quota, are delicate matters. We've asked experts to weigh in on how they recommend treating an employee who just can't seem to hit a quota—and how your company can help them become more successful.
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What to Do When a Rep Misses Quota: How You Set Quotas Matters
Russ Lombardo, a sales consultant based in Cary, North Carolina, was working with a company about a decade ago (during the dot-com bubble) when the company's CEO made an announcement to his employees: "He said there was no reason we couldn't do 70 percent growth for the next two years," Lombardo recalls. At the time, the company was growing at a rate of about 25 percent, so the CEO was basically asking his sales employees to triple the growth rate. Did they make it?
"Of course not," Lombardo says. "When I asked him what he based that number on, he said 'Well, if the dot-coms can make a 100 percent growth, then we can do it too because we're more established. But yeah, it's easy to make 100 percent from zero. You just need to make a dollar."
Lombardo's story illustrates a common misconception in setting quotas: that quotas can be fabricated out of thin air, or based off of a mere desire to reach a an often-random benchmark.
"That kind of stuff actually demotivates people," Lombardo notes. "The quota has to be realistic, achievable, and based on some kind of metrics."
With younger companies offering newer products, however, Lombardo admits there is a bit of guesswork. "If there's an existing product, market, and some historical information over several years, then you can base it on what's being going on," he says. "If that's not the case, well, that's where the fun begins."
Even if you do the market research, it's hard to gauge how the market will respond, Lombardo notes. You might think it will sell, but do you really know how much? What's the competiton like? What's the market like? Is the market saturated? Is your product unique enough? "There's a lot of things that come into play," says Lombardo.
As a manager, you should figure out how long it takes to actually sell one deal from start to finish. Is it eight hours, 10 hours, 20 hours? So when thinking about quotas, it's often best to start thinking of them as a function of capacity—and then start thinking about things like revenue and closing ratios.
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What to Do When a Rep Misses Quota: Are You Setting Your Teams up for Success or Failure
Before letting go of a rep who isn't hitting quota, an employer should look in a mirror, says Ryan Tognazzini, an associate principal of Sales Benchmark Index, a sales consulting firm based in Atlanta.
"It goes back to understanding how that person got into that situation to begin with," says Tognazzini. "You have to understand the overall environment. It goes back to taking the time to understand the gaps and do the pipeline inspections. You need to say, 'Tell me about the opportunities that you're working on, tell me what happened in this conversation.' It's literally getting down into the weeds and understanding if the pipeline is real, and if there's hope. Good managers are doing that on a regular basis, and they know if their pipeline is well-qualified."
If your rep misses quota, instead of reprimanding them, consider offering them training, says Lombardo. When you run the numbers, it may be more cost-effective to invest in your employees, rather than firing off the poor performers and finding new ones, which, in sales, can be an expensive process that can take months.
In fact, according to The Bridge Group's analysis of its survey, it took companies on average 4.5 months get sales reps to be fully productive.
"Maybe they're not so good on the phone, or maybe they have trouble closing, or maybe they can't handle rejection," Lombardo says. "I'm a believer that good selling is more of a science than an art. You can teach people. If you are born with some of those skills, that puts you in a better position from the get-go, but that doesn't mean they can't learn."
Tognazzini and Levitt agree that every company owes it to their sales people to offer them the tools they need to be successful. "Unfortunately, many companies think that when their sales people come in, they should have all the training and ability to do things," says Lombardo. "That's such a fallacy. A company owes it to their employees to provide a sales process, training and coaching to help their people succeed."
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What to Do When a Rep Misses Quota: Patience is a Virtue
Small companies are notoriously impatient. Lombardo says he's seen many smaller companies where the CEO believes that because they used to sell a certain amount, and they've never been trained, they know it can be sold in a short amount of time. "They'll say, 'I hired some sales people, and they couldn't sell it, so I fire them and I bring in another, and fire them and bring in another.' It's like every six months they bring in a new salesperson, which means they're going nowhere. You're not giving them time to understand the customer or the market, and to train themselves. I've had people like that tell me, 'I shouldn't have to. They should bring that stuff with them.'" But this method rarely works. "You can't just say 'OK, six months and you're out the door.' You have to look at the Why."
So what is the Why? Is it a top-down problem with ineffective management, or is a bottom up problem with lazy employees?
Tognazzini believes it can be a bit of both, but often, it starts from the very beginning: hiring the right people. He believes every organization should list out the metrics of a successful sales candidate for the position at hand, and when interviewing, trying to find a match that goes beyond just a "good sales person." After all, being a 'sales person' is a nebulous term. Tognazzini asks, "Are you hiring a hunter? Or are you hiring an account manager and cross-selling and upselling inside a current customer base?" Two very different types of selling, which yield two different types are candidates.
What to Do When a Rep Misses Quota: When to Drop Dead Weight
At some point, all the training, tweaking, and coaching won't get your worst reps to start selling. But how do you know when it's time to let go of your lowest performers?
"If you've given everyone the same support, and seven out of 10 are performing at the level you've expected, and the rest aren't, you don't need to tweak the quota," says Tognazzini. "Then you need to look at the individual and understand why they are not performing if everyone else is under the same conditions."
Face it: some people aren't cut out for sales—even if that's their current title. But Lombardo says that on average, sales people are money-motivated, they want to succeed, and most importantly, they want to be rewarded. But it always comes back to the organization. "Management is a lot like parenting," he says. "You can't blame a kid for being bad if the parents don't teach them how to behave."