From Home Furnishing Business
Goal Setting to Drive Performance
One of the most powerful tools a performance driven sales organization has to motivate people and drive growth are goals.
By Tom Zollar
Yet, goals could be one of the least understood, and therefore most underused weapons in a store’s arsenal. In order to have the desired effect and power, goals must be at the front of everyone’s mind—particularly the sales manager’s—every day. Goals, and each individual’s commitment to them, are the driving force behind performance improvement.
Basically, everyone has goals but few people have structured, disciplined plans on how to achieve them. Too often, goals become wishes or daydreams as people go about their daily work and allow themselves to become distracted from the pursuit of their goals. Unless a goal is so important to a person that they are willing to commit themselves totally to achievement, the goal will be meaningless and will unlikely be reached.
It is often difficult to get a salesperson to commit to a goal for sales volume set exclusively by management, yet that is how most retailers create them. Other than the fear of losing one’s job, there is no internal, personal connection with an owner- or manager-based goal. A goal can be the motivating factor behind an individual’s performance only if a direct connection between the result and some personal need or want of the employee exists. It is, therefore, as important to know why a person wants a certain result as it is to know that they want it.
We often think that it is all about the money, but it is not. Employees are motivated by different things, not only income. Even though people have changed and various generations have different priorities, the following main motivational factors have consistently been cited throughout the last 50 years.
Fear—Sometimes the fear of losing one’s job pushes a person to strive harder to achieve a goal. Another person may be more afraid of failing as a blow to their self-esteem. Fear of being considered a failure by friends and family can be a powerful motivation to succeed.
Recognition—Many people like to be No. 1; the best at what they do. That need drives their performance. These people often grasp new ways and better methods faster than others because they see them as tools to be used to remain on top. Other people want to feel the internal pleasure of being told they have done a good job, have met their goals, and are valued employees.
Belonging—Some people thrive on teamwork and being part of a high-performance team. They like having a hand in setting their own goals, knowing management and their peers will respect them. These people respond to group celebrations for achieving group or team goals whether or not they have achieved their own.
Achievement—High achievers will always strive for more, often as much for their own personal gratification as for being recognized as leaders. Care must be taken in setting goals with these people so that they do not set them too high and doom themselves to failure, which is the last thing they want.
Aside from financial, these are the four top job satisfaction factors that motivate individuals. Therefore, to be consistently successful in gaining each individual’s commitment to a goal, managers must be aware of which factors play a part in each person’s mindset, and provide the opportunity for them to be rewarded in those areas of need.
That said, the strongest factor we directly control is that we pay them for how they perform. We can coach people toward goals better when we understand the underlying factors in play but we will always have sales volume as our primary target.
Before beginning the goal development process with individual salespeople, management must have an understanding of what the store potential should be. The simplest way is to multiply the store’s average revenue per up from the last 12 months times the most intelligent estimate you have for the coming year’s total traffic—Ups x Revenue/Up = Revenue. Then, look at what improvement the sales management efforts can honestly be expected to achieve in the staff’s performance. Take the estimated new revenue per up and multiply it by the traffic estimate to get a target for next year’s sales volume.
From a business management standpoint, this is a great way to determine where you think you can go in the coming year and also to get a handle on how much of an increase you want from your staff. In most cases, traffic will not increase much so growth will have to come from the sales team’s performance improvement. However, some stores may need to add staff in order to handle increase traffic. Either way, you need to know where your growth will come from and for what part of it to hold your staff accountable.
As much as the business manager needs to know this to plan for a store’s growth, it is not something that will motivate most staff. While they may be totally devoted to you and that could help motivate them, for the most part your goals are your goals. What you need to determine together is what their goals are.
Salesperson-Based Sales Goals are the most meaningful and therefore powerful ones you can have. So let’s look at a few things you can do to develop them with your staff members.
Goal setting should start with a one-on-one meeting between the sales manager and the employee. The meeting allows the salesperson to set a goal that the sales manager understands and to which the salesperson can be committed. Ensure the salesperson fully understands all of the implications of the goal. Help them relate the goal to their current level of performance in the three critical areas: traffic, close ratio and average sale. Finally, clearly spell out what has to be done by them and by you, in order to insure that the goal will be achieved.
You will basically use the same process we used for the store goal above, starting with where they are now. Show them how multiplying ups by their closing rate and average sales equals total sales. Then, how multiplying that by the commission percentage determines the majority of their income (less spiffs, bonuses, protection, etc.). The purpose is to connect the dots so they come away understanding how the numbers work together, because if they do, it will make buying into a performance goal easier for them.
Once they understand how income is tied to what they do, you can ask them where they want to go with it. How much do they need to grow their income in order to do the things they want to do in life? Many people have never really thought about what they want to earn, living check to check thinking that the new car or house they want is beyond their reach. If you can find out what they want and tie that to selling more, then they will be more willing to take ownership of the sales goal and move closer toward their dreams.
Ask each person what they want to earn during the next year and help them come up with an income target that you both feel is achievable. Divide that amount by their historic effective commission rate (total previous income/total previous sales) to come up with what they will need to sell in order to earn it to create their sales goal. Drive home the point that this is their goal for themselves, but you share responsibility and will work hard to help them achieve it. If your store is properly staffed, most often the sales teams sales goals will exceed management’s target.
Reality is that many salespeople are not aware that the way in which they perform impacts outcome. Many consider their results to be a matter of customers’ likes or dislikes, the products a store offers, poor or ineffective advertising and promotions, or a dozen other reasons, all of which lie outside of their control.
The goal-setting process is the right time for the manager to discuss this issue and set the stage to work with them each month toward their mutual goal of income growth.