Setting sales targets – using not abusing them
23rd April 2017 | Dr Monica Franco-Santos and Dr Javier Marcos
In our previous article in this series, “The classic performance dilemma”, we presented a brief outline of the properties of effective sales performance measurement systems. In this follow-up article, we focus on a widespread practice in sales organisations: the use of sales targets or goals. We highlight the key issues associated with performance targets and offer guidelines to minimise their unintended consequences.
In September 2016, it was widely reported in the United States that 5,300 Wells Fargo employees had been dismissed after it was discovered that over two million fake accounts had been created by these employees. The Consumer Financial Protection Bureau revealed that Wells Fargo staff had secretly opened unauthorised accounts to hit sales targets and receive bonuses. Meanwhile, in the UK, the Financial Conduct Authority claimed that aggressive sales goals with bonuses linked to them underpinned a number of the high-profile cases of mis-selling in the financial sector.
Sales targets are extensively used by sales organisations. Performance goals define a “desired”, “promised”, “minimum” or “aspirational” level of performance. About 95 percent of Fortune 500 companies use performance goals in their sales compensation schemes. A study led by Andy Zoltners estimated that sales compensation in the US economy totals about $800 billion, almost three times the amount spent on advertising.