It also has an impact on employee commitment. Against a backdrop of generational renewal of sales teams and managerial change, how can you ensure that you set ambitious, realistic and motivating objectives for your sales force over the long term?
Setting sales targets: a strategic issue
Let's clear up a common misunderstanding first.
No, setting individual sales targets doesn't just mean setting the sales figures that each salesperson must achieve in order to be eligible for commission!
- On the one hand, the criteria taken into account to evaluate their effective contribution to the company's objectives can be multiple: margin generated, percentage of sales achieved on a particular offer or target, number of new customers signed up...
- On the other hand, their level of commitment can also be measured by the means used to achieve it: number of new prospects identified, number of telephone or face-to-face appointments made, number of sales proposals sent, conversion rate...
- Lastly, objectives can include a collective component and encourage cooperation, in addition to individual performance: variable remuneration can be made conditional on prior achievement of a collective sales threshold, or working time devoted to internal projects can be taken into account...
It's a real strategic issue, involving choices whose impact is not only financial, but also managerial : employee commitment and the way teams operate partly depend on it.
5 best practices for defining sales objectives
1. Involve the sales team in the process
The most common pitfall in this area is to repeat the previous year's model and apply it identically, without questioning its effectiveness. It's a good idea to include a phase of consultation with sales staff on the subject: get their opinions, their feedback on the system already in place, and any suggestions they may have for improvements. Present them with your own ideas for change before implementing them, to test their reaction to the options envisaged.
Taking this feedback into account will ensure that sales reps adhere more closely to the objectives you present to them later on.
Consulting them does not mean involving them in the final decision, but it is useful to know their perception and to integrate it into your thinking, among other criteria that are part of a more global vision of the company.
2. Define operative variable elements
As we saw above, there are potentially many criteria that can be taken into account when defining sales objectives.
Don't forget that each of these criteria will then have to be regularly monitored, and will come into play in the calculation of the variable part of salespeople's remuneration. You're going to have to make some choices, otherwise you'll end up with a veritable gas factory!
Select your criteria (preferably at least 2, and no more than 4) and define their weighting according to the importance you attach to them.
The profit-sharing system you propose must guarantee the motivation and commitment of your sales staff over the long term. You could, for example, combine a performance target (sales of €500,000 for the year) with a resource target (making 8 appointments with prospects per week, etc.).
3. Perform a preliminary simulation of the proposed system
The best way to ensure that the selected criteria work and to check the overall coherence of the planned system is to test it. Discovering during the course of the year that the system is not working satisfactorily could have serious consequences for the company.
Using the figures available for year N, run simulations to check that :
- the data needed to establish the variables is available (already tracked in your current monitoring system, or if not, easily/quickly accessible)
- multi-criteria, weighted calculation is easy to perform (no gasworks)
- the results obtained are consistent (no major discrepancies with the current system)
And make sure that these results are stimulating for your sales force! Set yourself a target of 70% to 80% of the team (minimum) achieving their sales targets, and receiving satisfactory bonuses.
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4. Establishing "fair" criteria
To ensure that objectives are perceived as "fair" and generate lasting support, they should be defined according to criteria that depend directly on the actions of sales staff : number of appointments won, number of deals won...
As far as possible, exclude external factors or third-party intervention: in the context of new business models, in particular, marketing can intervene in all or part of the sales cycle, so it needs to be distinguished from actions directly attributable to salespeople.
As far as possible, adopt a qualitative approach: sending out as many sales proposals as possible, for example, doesn't have to be an end in itself; combining this with a notion of conversion rate allows you to measure the quality of your work more accurately.
Depending on the situation, it may also be important to take into account certain disparities (between junior and senior salespeople, geographical territories covered, account development and pure conquest, etc.) to reward not only the results achieved, but more broadly the efforts mobilized.
5. Two-step communication
Once your system has been established in a coherent, efficient and "fair" way, don't neglect the (crucial) stage of presenting it to the members of your sales team!
Plan your communication in two stages:
- A collective presentation to the team, to explain how the system works, to inform the team of the criteria taken into consideration, and to highlight the overall coherence of the system with regard to the company's objectives (financial, strategic, etc.) and the reality on the ground.
- A one-on-one discussion with each member of the sales team, to clarify their individual objectives in detail, and answer any questions they may have.
Sales people need to have a clear idea of the level of variable remuneration to which they are entitled, and be able to translate these objectives into action priorities and concrete organizational elements.
You should also specify how key data will be monitored (weekly reporting, CRM tracking, etc.) and how often results will be evaluated.
If the defined system meets this set of best practices, and is regularly monitored and effectively managed once implemented, you have every chance of ensuring that your sales staff are actively involved in achieving their objectives and achieving results!
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