Question on target setting - We have annual target for the management (CEO, CFO, investors). These then are modelled into targets for the sales teams that are quarterly. How do you roll-over the Q1 deficit over to Q2? simple eg . Annual target = 20mn. Quarterly targets are 5mn/qtr. But in Q1, the sales team could close only 2mn. What do you do with that deficit of 2mn? Of course the CEO/CFO will push to spread that 3mn over the next 3 qtrs and so now the targets are 6mn/qtr for Q2/Q3/Q4, which then when pushed onto the sales team makes it sound unreasonable to the sales people. How do you strike the balance?
That would be a significant miss in your example so the more important activity is to first understand the gap as that will inform what you do next and how you might adjust things, or you risk just moving the issue further down the road.
If you don't do the analysis on the miss now, that's how companies end up over-hiring based on an unrealistic plan and having to scale back etc.
If it's a small miss and due to slippage, that's a different approach. Top of funnel - potentially a different approach again. Highly seasonal, different again. Personally, I'd want to be digging into the data and modelling from the bottom up and comparing that to the top down targets.
Great answer Oliver T.. In addition Kejal S., quarterly targets should NOT be set by what happened in the previous quarter. If your team did $10M in Q1, would Q2's target be $0? Of course not. You should set targets based on seasonality, product cycles or planned launches, historical lead volume/sales cycles/conversion rates, and sales rep capacity. Simply adding the deficit to Q2 will set unreasonable expectations on the team (especially after coming off a bad Q1).
Oliver T. Lowell S. - thanks. Analysis is indeed the first thing to do. BUT, we know things are never very straight. There's always a push from CEO/CFO/investors to increase targets every Q - if you missed this Q, then move the deficit on the subsequent quarters, if you over achieve then the team is doing great/there's more demand and hence increase the target. Striking a balance is what I'm aiming for.
