For the past couple of days I’ve been locked in a debate with two sales coaching professionals over the value of quotas.
Except for a brief stint in my early 20s as an inbound customer service rep, I’ve been in sales my entire working life which now spans over twenty years. For about half of that time I was a partner in the business but my contribution has always been on the sales side as opposed to the operations or administrative side of the things. I think that makes me pretty well qualified to talk about how best to motivate salespeople.
Here’s what I’ve learned;
1 – Quotas don’t work.
A quota is a minimum standard imposed by management as a calculation of what it costs to train and maintain a salesperson in their current position. It takes into account the cost of resources the salesperson uses, like operations personnel and support staff, company car, office space and so on. It has nothing to do with what the salesperson needs to survive personally and everything to do with what the company needs to be profitable.
But at the end of the day most employees, salespeople included, don’t really care how profitable the company is. They just want to make sure they make enough to keep their own bills paid. By setting a quota management has tipped their hand, it’s no longer a reward to strive for but a punishment to avoid. In the long run it breeds distrust and resentment between management and the sales department, it’s not long before the salespeople on the bubble start looking around and asking; “does the HR director really need 3 assistants and a company BMW?”
2 – Treat Salespeople like Partners.
Partners don’t have quotas, they have bill collectors. If a partner can’t take enough money out of the business to cover their personal expenses they stand to lose a lot more than just their job. In my over twenty years in business no quota could motivate me more than when the bill collector called and threatened to cut off the hydro in my home. (In the early years that exact scenario happened more than once)
Feel free to reward salespeople who hit targets but those targets should not be minimum standards and come with a punishment for missing them. A bonus is a bonus, not just a thinly veiled reverse of a quota.
3 – Be Transparent.
This goes hand in hand with number two. If you’re treating your salespeople like partners they need to know the true cost of running the business. They need to know all the numbers that go into the so called quota calculation but they also need to have a vote as to how money is spent. Maybe not a full voting share, like an equity partner, but they at least need to be told why the HR director has so many assistants and be given an opportunity to suggest improvements to efficiency. After all, they brought in the money that’s paying for all those things, they should get a say in how it’s spent.
4 – The Sky Is The Limit.
I’ll never forget the day, as a young salesperson I first realized how much money a well structured commission could net someone if they were willing to work hard. The CEO personally delivered my pay-cheque to my desk and congratulated me for making more than he did! That one event, coupled with the knowledge that it is also very possible to make nothing in a commissioned environment was all the motivation I ever needed. By giving your salespeople a realistic shot at being the highest paid people in the building you eliminate the need for any kind of negative reinforcement like quotas.
Of course all of this assumes we are talking about a pay structure based 100% on commissions and not employees who receive a set salary or a hybrid of base plus commissions. The minute a company starts to give salespeople something just for showing up they’re no different than the secretary or any other hourly employee and my whole argument against quotas falls apart.
Then again in my humble opinion a salesperson with a base is kind of like an acrobat working with a safety wire, no matter how high they go their accomplishment is somehow less impressive than if they had worked without it. When Nick Wallenda walked across Niagara Falls on a tight rope it was impressive, but everyone knows ABC never would have let him die on live Television and the safety wire he was required to use made sure he was never in any real danger.
Working in sales with a base (which necessitates a quota) is like walking a tight rope with a safety wire and where’s the fun (or risk) in that?