Entrepreneurs have a natural tendency to focus on the numbers. After all, sales are the lifeblood of a business, at least in the short term. In the long term, other factors may be as important, if not more important, than sales. These include branding, customer engagement, and customer loyalty.
But to keep going for the long haul, you need your employees to make sales now. To get the results you need to sustain and grow your business, there’s a natural tendency to set employee goals focusing on sales.
However, there are good reasons to shift the emphasis away from sales and refocus it on action instead. Sales goals can have some unexpected negative consequences, especially when you set the bar too high.
Don’t encourage shady dealings
When employee goals are tied to sales numbers, salespeople are far more likely to make decisions that aren’t in the best interest of the business. Time and again, companies with a relentless focus on sales turn out employees who promise customers the world, even if they know they can’t deliver. Or they offer unauthorized discounts that negatively affect the bottom line.
Consider the following two examples which seem harmless, but we can all likely relate to:
Your purchasing high-speed internet and contact a major internet service provider. (real examples)
The representative assures you that the plan you’re considering comes with lightning-fast speeds that blow away the competition. He also states that you’ll likely be able to extend the new customer discount beyond the official limit of 6 months.
Skeptical, you do a little research validates that skepticism. Only to find that several competitors offer plans at the same price or cheaper that come with higher speeds. Clearly, the employee was so driven by the need to meet his sales goals that he would say just about anything to make a sale.
You go shopping to purchase a fridge. (real examples)
You’re trying to decide between a few different models, and the price is a concern. You’re leaning toward the least expensive model, but the salesperson is trying to nudge you toward the high-end one.
The difference in features isn’t enough to sway you, but she pulls out a coupon and tells you she can give you the coupon discount, and that she’ll use her employee discount on top of that. That will bring the price of the most expensive fridge down almost to the level of the cheapest one.
These are two actual examples put forth by some of our team members of sales interactions they have experienced. Maybe you have had similar situations occur to you.
In each of these cases, an employee was so sales-focused that he/she forgot entirely about the best interest of the company. These salespeople might be working on commission. In that case, the drive for sales is understandable, though the outcome not ideal. Or they might work for companies that use sales as a primary evaluation factor.
Either way, the result doesn’t amount to higher profits (probably) or to more satisfied customers.
Why This Doesn’t Work – A Psychological Perspective
In Psychology, goal setting theory has several conditions. These include:
- Goal acceptance and commitment – the individual must have a high degree of commitment to achieving the goal. Without commitment, he or she will not find the motivation to complete the necessary steps. In both examples, the employees had at least some commitment to individual goals, but those goals didn’t necessarily align with those of the company.
- Goal specificity – goals must be conceivable, believable, and achievable. We can’t know the nature of the employees’ sales goals for sure. But companies often set sales goals that are very difficult to achieve. Or the goals are not well-defined, so employees are essentially left to make up their own. Usually, these are self-interested.
- Goal difficulty – goals should be difficult enough to be challenging, but not so difficult as to be unattainable. Studies have shown that setting unreasonable goals tends to lead to dishonesty. We don’t know for sure that the goals for the employees in the example were too high, but it’s a safe bet.
Additionally, several mechanisms affect the outcome of pursuing a goal:
- Direct attention – when a person is committed to a goal that is both specific and reasonably difficult, he/she focuses efforts on those behavior’s needed to achieve it.
- Energizing – the individual feels inspired to do the work needed to achieve the goal.
- Task Persistence – the individual will spend the time needed to achieve the goal.
- Effective Strategies – he/she will try to find the most effective strategy to reach the goal.
To ensure that employees stay motivated, use what psychologists call SMART goals.
The goal is well-defined and not overly broad. For instance, telling your employees they need to make more sales calls each day is not specific. A better employee goal would be to make at least 20 sales calls per day.
The only way to know (and for your employees to know) how they’re progressing toward their goals is to make employee goals measurable. Measurement lets you know when the goal is complete, and also allows you to provide feedback along the way. 20 calls per day are measurable. More calls are not – you don’t know when the goal has been reached.
It can be an individual or a group goal, but it must be assigned to someone. Otherwise, there is no accountability.
While goals should be challenging, they should also be realistic. If your salespeople have been averaging 16 sales calls per day, an employee goal of 20 would meet these criteria. Setting the goal at 100 calls would be challenging, but not realistic.
The timeframe should be ambitious but realistic. To get from 16 calls per day to 20, you might give your salespeople 2 weeks. It really depends on your own evaluation of what steps are needed to reach the goal.
Goals Setting Theory – What It Means for You and Your Employees
SMART goals have been shown to be effective in multiple scenarios, from education to personal life, to the workforce. One limitation is that focusing too much attention on one goal can make it hard to achieve other, simultaneous goals. To minimize this effect within your own organization, focus additional attention on prioritizing goals.
Additionally, you should help employees find a balance between goals that are directly related. For instance, the goals of increased calls and better customer service feedback contradict one another if employees don’t know how to balance the two.
I can’t tell you whether to pay your employees based on commission. That depends on your industry and specific business model. However, you should keep in mind that commission-based pay structures can incentivize behavior that is bad for business. So you need balance in this method to ensure the end results you’re truly looking for.
Such as, if you are paying commission, try to prioritize non-sales goals, such as quality of customer interaction, review scores, and the number of customer contacts. Offer monetary incentives if you are able.
How to Structure and Prioritize Non-Sales Goals With Sales Objectives
Emphasize action over sales. So, instead of a dollar goal or a number of total sales, make your employee goals about the steps taken to make a sale whether or not those steps actually result in a sale. Not only will this discourage dishonest behaviors, but it should disincentivize the kind of high-pressure sales tactics that lead to short-term results but not long-term loyalty.
For example, if you know your numbers and you know that it requires approximately 10 calls to make a sale which averages $1,000.00. If your goal is $2,000 in sales per day, set a 20 completed call goal. Work on improving the calls, and blow the sales goal out of the water.
Aside from lessening some of the negative effects associated with high sales goals, action-oriented goals tend to result in higher employee satisfaction. Employees have the ultimate control over the actions they themselves take. Ensure those actions represent the brand you want front and center foremost.
The positive effects of prioritizing action include higher customer satisfaction, better long-term results, and happier employees. It’s really a win-win strategy that far too few companies have the foresight to implement.
Make smarter employee goals and get out in front of your competition.