April 8, 2019 | Written by: Mark Donnolo
Categorized: Sales Performance Management
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You’re probably familiar with philosopher George Santayana’s admonition, “Those who cannot remember the past are condemned to repeat it.” While that’s hard to dispute, most of us will admit to occasionally falling short. And when we do remember not to forget, we don’t always question history in a meaningful way.
A recent survey of a range of businesses by SalesGlobe, found that the sales quota-setting process is challenging. One of the biggest challenges, faced by 55% of respondents, is that their historical method doesn’t factor in market opportunity or sales capacity. In sales, if you remember only the past, you may also be doomed to repeat it.
Repeating the past by not learning from our mistakes
Are there any organizations that can use a purely historical approach to quota setting? Sure. A company with no change in the size of its sales force and no improvements to its capabilities, such as technology to drive sales effectiveness or a sales ops team to provide support; no new competitors; and no variation in the customer base. For a sales organization that exists in such a vacuum, a purely historical method for quota setting makes sense. But the rest of us should remember that history is only one part of the picture.
An encounter with reality
Without factoring market opportunity and sales capacity into the equation, history alone is as useful as looking into a crystal ball. If we don’t ask questions that get to the heart of the story, we still may be doomed to repeat the past. I’ve found myself recounting a personal anecdote that illustrates the trouble with history.
One night my daughter called from college. Her Jeep’s engine had seized up, stranding her on the side of the road. I called roadside service, which towed the vehicle to a nearby garage. After inspecting it, a mechanic informed me that the engine had frozen up because my daughter hadn’t put oil in it and that now we needed a new engine – the price tag: $5,000. Yikes! I wanted a second opinion. But it was the same at every shop. I explained the problem and they quoted me a steep price for a new engine.
Eventually, I called a shop with an unusual number of glowing reviews online. A guy named Jimmy answered the phone who asked, “Tell me the story of the car,” he said.
Hmmm. Nobody had asked me that in my other calls. “When did you buy it? How does your daughter drive it? Has she had any accidents?” As I explained I could hear Jimmy on the other end saying, “Hmmmmm. Oooooh. Right, right…”
“We got an oil change a month ago,” I said. “So I know it wasn’t out of oil.” After about ten minutes, I’d told Jimmy pretty much everything. “Tell you what,” he said, “bring it in and we’ll take a look.” I was already sold.
A day later, the phone rang. “Mark! Are you sittin’ down? You won’t believe this. We opened up the engine… and we found an old rag in the oil pan.” Huh? Was this a set up I asked myself.
We traced the story back to repairs we’d had at another shop. When they worked on the car they accidentally dropped a rag in the engine. That rag absorbed the oil and starved the engine.
After the other shop’s insurance company completed an investigation, we got a free engine.
If Jimmy hadn’t asked me to tell him the story, we wouldn’t have discovered the true issue – and I’d be out $5,000.
Design Thinking saves the day
Jimmy the mechanic wasn’t aware of it, but he used Design Thinking, a methodology that we apply with our customers. It begins by gaining a solid understanding of the problem. “Tell me the story of the car.” Jimmy wanted the whole story, which no one else had asked about. He empathized with my daughter and me. In fact, empathy is the first step of Design Thinking that leads to understanding the story and redefining the challenge. You look at the problem through the eyes of someone who’s facing it. In sales quota setting, that means getting bottom-up input, something that 52% of organizations told us they struggle with. Having gotten the complete story, Jimmy saw the problem and defined and solved for it better than the other mechanics.
Learning more with the right insights
Typically, when Design Thinking is applied to quota setting, the process leads to questions that neither finance, nor the C-suite, nor sales leadership ever thought to ask. Using a Design Thinking approach, you’ll examine your quota challenge differently, incorporating the three dimensions of quota setting – the people engaged in the process, the organization’s market opportunity, and the sales capacity of the organization. Combining the right problem-solving process with proven quota-setting methodologies can help you improve the quotas and performance of your organization.
Visit IBM Sales Performance to learn how IBM SPM solutions can help you improve sales performance and operations with better incentive compensation plan management and smarter sales territories and quotas administration. Get faster insights with advanced analytics.