A nervous group walks into the conference group. They are still trying to shake off the holiday haze, but are totally alert and loaded for bear. It’s our vice president of sales’ first all-hands call of the year and the team has honed in on one agenda item: This year’s quota.
Loni comes on and confidently runs through our end of year results. Then she sheepishly tackles the quota. “We expect that quotas will be handed out at the sales leadership meeting in a few weeks. We hope to see…”
Rizzo thrusts out his arm and stamps down the mute button of the Polycom star phone that sits in the middle of the long oak table. “This is looking at lot like last year, boss.” He stares at me. The rest quickly follow suit.“I suppose we won’t get our objectives until July again,” he finishes.
Loni keeps on talking, but nobody is listening. How can it be so difficult to have quotas prepared by Jan. 1, not July 31? Cursing the leadership in my head, I make excuses. The rebuttals are flying at me faster than I can think.
“Have they forgotten to fund Sales this year?”
“Maybe they want to see what we can do first and then pay out as little as possible for our efforts.”
“Why do they always roll out the quotas at the leadership meeting where there are no actual sales people?”
“Why do they give Loni her quota and then let her decide upon ours? Is she hoping to pay us all the same regardless of sales this year?”
Not having quota ready for the sales teams can be extremely damaging. Without solid numbers, hungry sales people can become angry and emotional. Emotional humans can do stupid things, like hold back on selling just to spite a well-intentioned company and finance department for not having the numbers cooked on day one.
One year when I was a rep, I decided to create a ‘plausible’ quota on a spreadsheet based on the results we had. The quotas were still lagging and it was July. I had had enough. I was blowing out sales that year and I decided to predict by how much. I calculated that I would be at 117% of plan. With some help from higher math I also calculated where my team mates would fall. Some were not pleased with my predictions, and an extremely bitter environment ensued. One rep started arguing for quota relief before we even had quota based on my spreadsheet!
While it is important to get the numbers right, it is more important to get the job done. Lack of quota makes sales wonder if finance is hiding something or pulling a fast one. It would be better to pay out the quota and then change the plan in July if it wasn’t working out. Delaying demotivates the team you are relying on to make a business plan. Having a budget issue with commissions is about the best problem any enterprise can ever hope for.
As I explained to my team sitting around the oak table after Loni’s call, it wasn’t that finance did not want to pay commissions. I knew people in finance. They were not devious. Speaking with my finance friend later that week, he explained that he was being paid to create a rational plan based on a number of factors such as market expectations and new product launches. The trouble was his targets kept changing and he did not want to guess and be wrong. It made perfect sense, but these kinds of complexities and dependencies are always with us. The real issue was his bonus was tied to creation of a plan that met budget.
What can be done to avoid this scenario?
Communication. While my Finance buddy isn’t about to blow his bonus by putting out a plan without all his questions answered, neither is a sales person like Rizzo going to put up with not having targets when he sets out on his first sales call of the year. The key is transparency. Sales leaders need to provide feedback to finance and get commitment around when the plan will be ready. Failure to meet commitment necessitates escalation. It isn’t a matter of calling Finance out. Quota is as critical as any budget to making a business plan and executives need to know when either is jeopardized. I think Rizzo would agree.
Ideally sales leaders and Finance need to be accountable to the sales teams. Loni would have done well to include Finance on her call to answer the tough questions. By understanding the dependencies in creating sales quota, the sales team can better empathize with the delays even if they don’t like them.
Deliver. Having quotas ready on Jan. 1 needs to be the norm. We will never have perfect data and it is not unheard of to change quota in the plan year, but if we are willing to tell shareholders that our business has a plan for 2014, there is no reason sales quotas should not be distributed too. At my company, the issue was how Finance was compensated and given their bonus. If we change the bonus criteria to be contingent on getting the plan to Sales by Jan. 1, the problem can be easily solved. More importantly both Sales and Finance need to be ready to bend. Sure the business plan needs to be met, but changes may also be needed along the way — both in favor of Finance and in favor of Sales. Both sides need to be ready to talk about it and come up with alternatives if thing just aren’t working out.
Back in the conference room, I am having trouble peeling Rizzo off the ceiling. He has everyone in a tussle. I know that if we don’t make our business plan 20% of the people in this room will be laid off in October. Frustrated, I shake my head as the team files out grumbling. If only there was a way to break this log jam.
Sander Biehn recently published “The 30 Year Paycheck: Destruction and redemption in corporate America.” He consults on organizational change in corporations.