Targets are for arrows

Arrows don't have a mind of their own. Men think. Whether expressed or not, they question the sanctity of targets handed down to them. When a government sets its development targets over a 5-year time line and misses those, it has a number of factors that it can call upon to justify its underperformance: too much rain, too little rain, nipah virus, resource reallocation necessitated by a terrorist attack, etc. Here the performance evaluator is the common man who can only complain but has to thereafter get on with his life. Repercussions are minimal. Catching a balloon under a bedsheet is easier than holding the minister responsible for the fuzzy target he announced.

Now compare that to what a sales executive faces in a business environment? If his business volume falls short of the target, he is called a non-achiever. The 8.5 richter earthquake that may have hit his territory is often not a sufficient explanation. Or, perhaps he would get away because the bosses have appreciated that the calamitous event was extraordinary. But leaving aside that earthquake or similar event, any hubris wouldn't save his job. There is no quarter given: there is no reprieve.

In a company, if such a huge lot rides on the salesmen's performance, one can't help and take a more incisive look at the way the targets are set. Aspirational targets set by higher-ups are very well for the press and competitors to take note of, but they can have a desultory effect on sales teams - specially, if those are not backed by similar sub-targets for operations and other lateral functions throughout the organization. Strangely, one finds that most companies set the sales targets in a top-down manner, where the sales man has little say in the matter. 

One company I consulted in East Africa had a sales turnover of over a $300 million turnover in fast-moving consumer goods through its 20 branches located in all regional centers. When I got into the act, I found that the sales targets were conveyed to branch managers for one or two products that were grabbing the CEO's attention on that particular day. But for one stray high performance for one particular product in some of the branches, sales were not getting any better year on year. Face-to-face meetings were scoffed at—the rationale being that the branch managers' absence from their desks would negatively affect the sales for those two days. 

I could get the CEO to agree on an annual sales meet; quarterly course correction meetings were rejected out of hand. Toward moving to a bottoms-up approach to target-setting, each branch was asked to do their research and present product-wise targets at the meet, where the senior managers would try and understand their strengths and weaknesses and would thereafter rationalize the targets. Interaction was the key word, and for that reason these meets were christened as "workshops".

Semantic niceties apart, CEO tried hard but found it difficult to refrain from his top-down imposition of targets. Regardless, sales improved some but targets were missed by a wide margin. By the time the workshops went into third year, the CEO went full throttle glowering at the squirming regional heads of sales and raised the targets rather arbitrarily: mostly jacking it up by 20 per cent to 30 per cent over the preceding year's sale. The purpose of the interaction was altogether defeated. Come next December, almost none of the branches achieved those targets. They took the flak, but had by now learned not to budge from what they said they could sell knowing fully well that all of them could not possibly be sacked. Apathy sat in. The exercise by and large failed, but for the small gain of meeting the sales teams and getting to know them better. The workshops are being held regularly and the sales go up and down erratically without showing any consistent growth.

The problem is that in absence of indicative shop audit surveys, the management has to by and large depend on the regional heads' feedback on market size, market shares and regional price trends. This data is grossly manipulated by the sales teams for the obvious reason that more optimistic numbers would end up in stiffer targets. Top management, in full awareness of the phenomenon, tries to extract more ambitious commitments, regardless of the fact that they too cannot back up their stated expectations with any irrefutable numbers and information from the field. It is a complex situation where management and salesmen keep jockeying with each other towards fixing a target; and none of them have a clue about the full sales potential in their territories. 

It is not my case here that targets are invariably set in such a comical manner, but more often than not the numbers appearing in the target column have their genesis in quite a myopic rigmarole. Of course, there are traditional and some later-day target setting devices. These are targets emanating from budgeting exercise, balanced scorecard, and stretch-targets. All of those have their shortcomings even in well governed businesses, but the fact is that all of those require reliable information on market size and competitors' share. In an environment, such as the one I alluded to earlier where market information is nearly not worth the paper it is presented on, it is best to institute a pay for performance regimen. Each salesman must be paid a smaller amount in fixed salary. For all products three or four tiers must be created and the salesman's performance bonuses must be linked to the quantity tier he achieves during the month. Lazy and unimaginative sales people will leave, which is any way good for the company. From the rest, the company will benefit by unleashing their potential. The persistent triers will find markets you did not know existed. The regional branch managers will reorganize their sales teams better. Now, you want a stick with the carrot you are giving them? Introduce a penal cut for wastage, spillage, inadequate stock rotation and product expiry; and watch those reduce. The system has to be transparent and payments of performance bonuses prompt.

Thinking minds will find their own targets and go on setting them higher.

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