If your business does not achieve these lofty heights, spend some time focusing on the consequences of missing target.
Entrepreneurs sometimes set wildly optimistic sales targets, with unexpected consequences. Where targets are not reached an aura of negativity will usually permeate the company.
There is typically finger pointing with sales people and marketers coming under fire. In turn they blame product performance, pricing, customer service and management.
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If low sales are stated as the reason for reduced bonuses for staff, ordinary workers may see sales people as responsible for their loss.
The worst type of financial managers use this opportunity to talk about the risks to jobs. The entire atmosphere becomes toxic and morale plunges.
Identify the causes
If targets are frequently not met you need to act. Look for the root causes without going on a witch hunt; if you are only trying to allocate blame, all you will get is finger pointing and defensiveness, which will mask the real causes. Listen to sales people, customers and others and find joint solutions.
The problem may lie outside the sales team, it may even be your management style or forecast optimism. Be honest about assessing the company’s delivered quality, product competitiveness and customer service. Fix the problems.
If one section of the company fails for no real reason while others succeed, you will have to take remedial action with training, performance management and ultimately replacement. Don’t be public about how staff are being watched.
Some businesses deliberately set high targets, believing that sales teams stretching for almost impossible targets will achieve more even if they do not reach the target. If you practice this technique make sure anyone affected understands what you are doing, that the sales team agrees and that all understand what constitutes success or failure. Better still, set good stretch targets and avoid the complications.
There are businesses that serenely make target year after year. Does that mean they are great marketers or that they are simply setting their sights too low? Although exceeding target sounds like a good idea, your stockholding, production, deliveries and administration will all be squeezed because this volume was not planned. Commission and bonus schemes will include extra amounts to reward overachievement.
It is wonderful if you pay this bonus for exceptional work for a couple of super achievers, but if an overachievement bonus becomes expected for ordinary work, the incentive will be lost.
Sadly, some targets are deliberately set low to guarantee managers and sales staff bonuses even for poor performance. Do not fall into this trap; routine overachievement is as bad as routine underperformance.
Speaking of targets, do you set logical ones? Many targets are simply an increase on last year; or worse, a calculation based on what is needed to cover expenses and make profit. If you do this, stop right now.
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How much the market will buy of your products and services in the next year has nothing at all to do with your costs or profits, and probably little to do with what happened last year.
Put some thought and information into the target. Take your product, team and competitive strengths into account. Some teams and companies will achieve returns far above those of their competitors’ even though they do not have a significant technology or services level advantage. They may be better managed, more experienced or better trained.