Do you set quota? Do you set financial goals and plans for your organization? It’s getting to be that time again when sales and business leaders begin to look into their next fiscal year. Over the years I’ve noticed an interesting trend. When it comes to fiscal planning, leaders do one of two things, they pick a number they want to make, then figure out how they are going to make it or they look at the data and identify a number that is consistent with what the data tells them.
These are two very different approaches. The first one makes us feel good inside, because we’re getting what we want. We want to grow by 30%. So, we say that’s what we are going to grow by and then we ask the team to tell us how we are going to do it. It’s a game companies have been playing for years. I call it the pressure game. The board, or the PE firm or the street have performance expectations. They put pressure on the CEO and leadership team to make some number. The CEO/Executive team then turns around and puts pressure on the organization to make that number regardless. The leaders provide a number of reasons why they think goal or quota is possible, why it’s important to the organization and then pass the numbers down. Everyone is rallied around the grand goal, initiatives are put in place, strategies are created, and everyone charges the hill. People like this approach because they never have to say NO. Any hint at dissent and the dissenters are cast aside for not being on board. We take what we’re given and go for it. No push back, no challenging the status quo. The problem with this approach is it’s not grounded in anything. It’s driven by the emotional, political, or crisis needs of the organization.
The second approach, starts with the data. It starts with a solid understanding of the external environment. What does the macro-economic environment look like? Is the industry growing, flat, or shrinking? What is the competition doing etc. It also includes a thorough internal assessment. What is the team capable of? Do the resources exist to execute. Are the appropriate relationships established? Is the capital available to make the investments? Are the processes in place to support the goals, etc? Finally, it includes setting reality based goals based on the data and internal and external assessments. Aligning the information acquired in the assessments with the financial goals and targets creates a realistic set of goals. By setting realistic goals, strategies can be built, strategies that can be achieved. This approach is more difficult. It can put people at odds. It may not provide the number everyone wants to see. It forces the players to be real with their growth and quota goals.
What type of company is your company? What type of leader are you? Are you looking at setting a double digit growth goal for quota in FY10? If so, why? Have you considered the economy is expected to grow only 1.6%? Where is the additional 9% growth going to come from? Is there something in your sector that you are looking to exploit. If so, is your company prepared to respond? Are the processes in place to capitalize on the opportunity? What information are you using to determine quota? Do you play the pressure game? Do you succumb to the pressure? Do you pick your goals based on what feels good, or what is real?
One sure fire test to determine which you are is to ask this one question? Have you ever determined that growth was not possible and that a decline was inevitable? If the answer is yes, then you listen to the data. Most companies should have seen 09 revenues would decline? By the fall of 2008 we had entered the recession, credit was tight to non existent, the housing market was in shambles, unemployment was climbing and consumer confidence was at some of the lowest points it had ever been. There was NO macro-economic data that could have supported an 09 growth number unless your business benefited from a shrinking economy. Yet very few companies or leaders were able to defy the pressure to announce growth. So growth it was, despite the data.
Data gives you the answers, you just have to listen. What is your quota going to be next year? Is it realistic? How do you know?