Colin (00:02.02)

Hello and welcome to today's episode of The Growth System, the podcast that looks at the world of B2B growth through a systems thinking lens. I'm Colin Shakespeare.

Chris (00:11.804)

I'm Chris Bayliss and today we're going be doing something a little bit different from certainly from what we planned because we had some feedback after the show last week most of which extremely positive which was which was really really lovely to hear but one thing that kind of came out of the comments that we received is what about sales targets how does that whole episode on metrics apply to the concept of setting targets and you know what's the kind of system view on that so we thought we

we would do a episode all about sales targets. What we're also going to do in a slight change to the format is we're going to be having a bit more of a, should we say unstructured conversation? I'm not sure a conversation is around that structured Colin, but what we're going to do today is have some more Colin. And I think that can only be

Colin (00:58.704)

We are known for our unstructured conversations, I think.

Chris (01:10.57)

a good thing in general and also because if there is one person in the reps space team that knows about sales targets, it's Colin from a long and varied career in sales. think it's fair to say.

Colin (01:24.676)

Yeah, I think in my experience, this is something that's been a bit of pet peeve of mine. I think the more we got into this sort of systems thinking mentality, I've realized that my previous sales leaders have kind of tended to kind of embrace and lean into this idea that we've been talking about throughout the series of people doing what they're measured on. So if we just say...

like an artificially ambitious sales target, then that's a good thing because reps will, of course, they'll stretch to meet the target, won't they? Without really much thought towards whether or not the system is capable of producing these outcomes, let alone the individual reps. And you know, sometimes you get a bit of confirmation bias because someone in the team happens to do well.

We get bit of happy eyes on that and at Hay Presto we say that this is a system and that it works.

Chris (02:29.375)

So I think, you know, let's address that sort of perhaps fairly obvious question at face value, but you know.

Why do we set targets in the first place? Like you said, we've said in the podcast lots of times before, know, goals and targets are a good thing. They're a lever that you can use to steer a system with. So it perhaps might surprise listeners to hear that actually when it comes to sales targets, we're probably not as big a fans, it would be fair to say, of the traditional sales target.

as you might otherwise think unless you unless you've suddenly become a big fan of month-to-month targets called LRJ.

Colin (03:10.928)

Yeah, never been a fan of the month to month and I think that the way sales targets and incentive structures for salespeople in general is something that a review is long overdue to paraphrase Robert Bunce.

Chris (03:25.248)

Yeah, you've hit on an interesting point for me there because I think that we should maybe set our stall out in terms of what we're actually going to be talking about, or at least where the delineation, where the system boundaries lie in this conversation, which is sales targets is the

financial number that is doled out by the company for the year split down to the quarter, split down to the month, split down to the seller.

And I think that whilst there is a, and you just sort of touched on compensation plans there, which is what made me think about it. know, comp plans are an entirely different thing that is typically speaking, very closely related to the sales target. I'm sure we'll, we'll talk on our thoughts about how closely those things should be related as we, as we kind of get into the episode, but you've got this sort of concept of

know, the comp plan, the sales target, but also metrics. know, last, last week we talked a lot about metrics. And I think as we kind of go through the episode today, I suspect we're going to be blurring the boundary between, between those three things. But the episode is really, we're going to try and keep on point and talk about the target, right?

Colin (04:44.612)

Yeah, exactly. I think everything we talk about on the growth system is related to everything else in some way. But in this case, focusing specifically on the sales targets and why we do that the way that we do it is a good tight focus for the episode.

Chris (05:06.304)

OK, so we've maybe alluded to the fact that we're not huge fans of the sales target in its traditional kind of manifestation. But there are lots of good reasons. We are certainly not anti-targets, or at least I'm not, but maybe I on a slightly different side of the fence. But I think when we're looking at sales targets, really there are lots of great reasons to be doing sales targets. They all make a lot of sense.

you know, they create expectations, enable us to do stuff like budgeting. And, you know, I think there's this concept of, of like,

the relationship between goals and outcomes. There's a reasonable amount of research on that, some of which personally I question when it comes to the application to sales targets. Maybe we'll talk about that. Lock and Latham is the one that gets kind of quoted a lot, I guess, in terms of this sort of goal-based measurement. But ultimately, for me, the value is fairly obvious.

the application I think is where I have more question marks in terms of what is normally done or normally applied. I think that, it'd be interesting to know your view Colin, like in terms of like, why are sales targets there in the first place?

Colin (06:29.456)

I think that's partly to do with just the idea of the sales target being part of life, part of doing business, part of being a sales person. It's just really entrenched in the culture of business and particularly the way that we do it in B2B. Really long standing practices that sound logical, know, where we're measuring quantifiable outcomes and

and we look primarily at like revenue and profit like the most important numbers. I think the sales leaders tend to view them as, I think you've already said this really to be clear about setting expectations to provide that motivation to do what you're measured on and to get to that number to...

drive the whole business forward to play your individual part in that and to just give you that really clear focus that we, you know, I think we've mentioned before, I'm not sure if we've mentioned it on the podcast, but you know, I've heard a CRO talking on stage in America about how we all needed to have a maniacal focus on our sales targets.

which was an interesting way of putting it. But I kind of get what he means that if everyone focuses on achieving this thing that we are measuring you on, ultimately, we trust us that we have set these goals or these targets correctly in order to drive the entire business forward.

Chris (08:07.542)

Well, I think you've just bowled one down the middle at me there. So let me sort of swing the bat at it. Trust us on these targets. So here's my big with sales targets is as someone that sets sales targets, I can tell you categorically, they're all made up, but how are they made up? think, you what's your kind of...

Colin (08:09.232)

Trust the leader.

Chris (08:33.406)

experience of that I guess you know where where do targets come from because I you know I've got some fairly strong feelings here.

Colin (08:41.04)

Yeah, I've more been on the receiving end of sales targets than involved in setting them. I have had some experience of certainly having explained to me how we came up with the number and it's typically from quite a short menu, perhaps a mix of these, but they're essentially reversed engineered from some big number that's usually defined by maybe what the investors and or the leadership, which sometimes is there's a kind of bloodline between those two.

Chris (08:50.977)

Yeah.

Colin (09:09.24)

a number that they want to get to. Now that's not me just saying that they're being like greedy or fanciful, although I'm sure that's occasionally a thing. But, no, of course not, course not. They might be listening, so we'll just put that caveat in there. But there might be really good, there have been good reasons that I've seen include things like saving the company from going under or unlocking series B to enable some...

Chris (09:18.382)

Surely investors wouldn't be greedy or fancy.

Chris (09:25.526)

Yeah, I'm sure most of you.

Colin (09:37.804)

serious scale or maybe gearing up for an acquisition or an IPO where, you know, hopefully if the salespeople are incentivized with equity, that's something that's going to be good for them. And so that's why we end up coming up with a big number. And then there's some other factors will come in, like maybe past performance is usually a factor. think sometimes, but not always, there's usually some.

optimistic reading of the market dynamics and maybe even less often an optimistic view of the actual capability. This is where I think the gap is the capabilities of the actual organization and the system that organization works to if indeed we can call it a system to actually deliver on that number. And at no time have I actually seen a really truly systemized approach to setting targets that really actually views

the sales organization as part of the holistic whole and aligns targets to the whole organization's goals and ultimately to sort of purpose driven strategy as we talked about the other week.

Chris (10:48.588)

think if you've seen that, it would be fair to say that that is very much the exception. Because, you know, my experience is that I think it would be, would not be unfair to say that in the majority of cases, sales targets are a wish or a dream dressed up in a spreadsheet. You know, it is

Colin (11:16.356)

Hahaha

Chris (11:17.718)

How much do we want to make next year? Let's divide that by 12 and then let's turn that into a monthly target and then hack it down as many ways as we normally hack it down, whether that's by, you know, team or individual seller or a combination of all of those things. It seems to me that sales targets are predominantly arbitrary. And even if they're not,

i.e. somebody has sweated blood and tears coming up with a very very reasoned argument. They are still at best plans that don't survive first contact with the market to sort of butcher the expression because particularly in markets as volatile as today, in competitive landscapes as complex as we have today.

it's really, really hard to do anything which I think holds water in more than a, you know, a sort of quarterly or half yearly cycle. But I don't know, it sounds like you've had some different experiences, which is great. I think certainly mine do not, I do not have that reference point of I thought that was done really well. In fact, we had, while I'm mentioning zero names, but we had a brief

Colin (12:34.554)

Hahaha.

Chris (12:42.274)

Should we say, I think that would be generous, land with us, essentially said, I want to be 11 % up by the end of Q1 and I don't want to spend any more money. And can you make that happen? And honestly, it's quite shocking to me that this sort of thing still happens because it doesn't take a, you know,

management theorist to work out that there probably should be some basis in reality that sits behind a step change in expected performance. If you've got

x last year or you got x this year, why are you going to get x plus 10 percent next year? What are you going to change? And if there isn't an answer to that question and you're not in a rapidly rising market, you know, maybe that is the answer to that question or whatever, then it's not going to happen. It is an aspiration. It is an arbitrary number and fundamentally

it's probably a recipe for wasted human effort, but maybe we'll come on to that.

Colin (14:00.112)

I think it also implies that the person setting that target thinks that their salespeople are currently not working to their full capacity. Perhaps they're spending a bit too much time on the golf course instead of selling because they don't really like getting commission that much. I suppose all joking aside, maybe there's an assumption there that perhaps the salespeople are not executing their sales process well enough. Well, if that's the case,

Is changing the sales target the right way to kind of pull that result out of them or should we be focusing on execution? So even if we can accept that there's valid reason to think that we can gain that 11 % without spending any more money, is that the right lever to pull? just raised the sales target.

Chris (14:55.648)

Yeah, yeah, just raise the tail target and just, you know, do what you're doing, but just better. And I think that, you know, there is an argument for, you know, doing more with the same for re approaching the strategy. But, but, but I think so often that that

that mechanism for setting the target is based on what people want to happen, not what people reasonably think could happen based on a grounding in evidence. And I think we started to touch on some of the problems with sales targets there. So, I mean, let's kind of dive into some of those. I was doing a little bit of research for the episode and...

found some fairly interesting stuff, which I'm not sure I would necessarily, you know, take to the bank as being 100 % applicable, but I was doing quite a lot of reading on whether...

the approach to setting targets in businesses is actually applicable to long-term goals. And when I'm talking about long-term goals, I'm talking about more than I'm going to do something today, or I'm going to do something this month. So, you know, over the course of a year. And I did some research and defined the concept of stuff like smart targets, which, you know, what is sales, a sales target, if not a smart target, it is specific, it is measurable.

achievable, okay, well, depends on your view on our last segment of the conversation, but one and realistic, probably the same. And it's certainly time bounded, you know, too much time bounded is as I think we'll probably come on to. And that's great. But I think when I read it is that sort of research that sort of background, it's like, actually, smart is project management methodology, not really a goal setting methodology. It is a task methodology, as in

Chris (16:51.358)

I'm going to listen to two episodes of The Growth System today rather than one. That is very easily conceptualized and achievable. I am going to make sure I listen to every episode of The Growth System on Tuesday at 5 past 8, just after it comes out for the rest of the year. Well, that is also specific, measurable, potentially achievable and realistic and certainly time-bounded. But is it likely to happen?

Or is stuff just going to get in the way over time? You know, they are, they pass the same test, they apply to the same thing. But while listening to two today is very obviously achievable, doing the same thing every Tuesday for the rest of eternity probably isn't. And, and I think you can argue that, that actually the period of goal achievement, you know, that ultimately targets don't necessarily hold water over the long term.

And I think there's actually also a little bit of research out there to suggest that sales targets actually hamper sales performance. And I know that we've got any sales directors listening, they're probably just, you know, spout their martini or whatever it is they're doing. And, you know, I think that what's interesting about that is that, and I think we'll come on to it in a second is sales targets, and we touched on it earlier,

Colin (18:01.328)

Ha

Chris (18:17.381)

have not always but have the propensity to become month to month, quarter to quarter, seller to seller and the way that they get broken down doesn't tend to have a lot more than a simple division attached to it and I think one of big problems for me with sales targets is that they inject a huge amount of short-term focus into the organization and you know this is the growth system

And I think you have to view this as a systematic issue because and I think ultimately sales teams, I was about to say don't, I think probably aren't able to. The structure of measurement means that they are not allowed to think outside of the box. And ultimately what it says is if you haven't done your number by the last day of the month or the last day of the quarter, then you have done a bad job.

you know, you are not performing at the level the company needs you to perform at. And I think that's a really big issue.

Colin (19:19.214)

Yeah, can subjectively or you can even objectively show how you've improved relationships with accounts that you're trying to work with or maybe like accounts you're trying to expand. And if at the end of the day, you're putting that across in your PowerPoint, in your QBR, and nevertheless, the numbers are, let's say falling short, then that will count for very little, not nothing probably, hopefully, but you know, it won't.

Chris (19:38.22)

The numbers are not in your favor.

Colin (19:48.802)

It would save you.

Chris (19:51.358)

No, and I think I'd come back to the point we've made before and the point we made at the start, which is the reason goals are a good lever in systems is that they ultimately impact behaviors. And as we've said before, levers work in both directions. And I think sales targets have the propensity to create bad behaviors among sellers, understandable bad behaviors, I might add, but

If you are on the hook for doing a number by the end of the quarter and you have got a deal which should close next month, you know, what are going to do if you're short? Well, you're going to try and pull it forward, aren't you? And you know, you've more experience of this than me, Colin, but certainly what I see is one of the main levers to pull something forward is good old discounting, right?

Colin (20:44.398)

Yeah, yeah. And then you got, I mean, you, know, this yourself, at least as a buyer, certainly, as well as a seller is that you, you know, to try and buy towards the end of the quarter or the end of the month, or you try and get, in fact, I think there's at least one piece of software that I've been involved in buying with you, where we caught the guy just at the very end of his quarter. so we knew to sort of couch for a discount at that point, because that's how it works.

Chris (21:10.434)

See you.

Colin (21:11.344)

And I guess similarly, there's the opposite problem of you've hit target. You don't want to put that message into this feedback loop that says, actually, my target was too low this month because I've overachieved there or this quarter even. Therefore, I'm going to sandbag these opportunities, is, hold them back a little bit so it runs into the next quarter or month or whatever the period that you're measuring is. Now, Chris, obviously, you know that I've never done.

anything like that or even being involved in it. But I have seen it happen in the wild for sure. In fact I think there are probably some seasoned account executives out there who would say that if you are not doing that then you're making a rod for your own back because that's the system as it is.

Chris (22:02.124)

that is exactly it, it? You know, it's like, if you are short, you're going to pull forward and you're going to count the price. that, you know, that to me is such a painful one. You know, that's such a systemic failure because

You know, you're going to do a deal today to get target. And then as a business, you're then going to pay out on that achievement of target on doing a deal that you could have done 24 hours later, much more profitably. And, know, this is not an edge case. This is like.

This happens up and down the land, in every land, in every company, in every month, in every quarter. Sales targets in that specific instance hurt profitability. I think that is unequivocal. It's a statement of fact, right? I mean, isn't it?

Colin (22:41.774)

normal

Colin (22:58.424)

Yeah, I mean, this is absolutely true. I mean, I don't know if anyone's done any really serious analysis in this in some of the organizations that I've worked in. But yeah, very, very much so where there's a sort of end of the month sort of massacring of the everything of the pricing structure, essentially. And the customers know, the customers know, we know, we've bought software and we know, everyone knows this.

Chris (23:23.242)

And absolutely. One of our tech partners, they recognize this and I've noticed they've tried to sort of start going the other way on this and sort of hold firm, but they fundamentally have a reputation. There's no point buying something on any other day other than about, you know, four days a year. If you buy on the last day of the quarter,

Colin (23:46.872)

Yeah, exactly.

Chris (23:50.138)

that is where you're going to absolutely nail the deal. It's like the car industry. I the car industry is now known in the UK, at least. I think it's slightly different in the US. But if you buy a car on the last Saturday of the quarter, you can pretty much name the price. You just walk in there. You walk into the building. You look at the most dejected-looking bloke behind a desk in the place. You walk up to him, and you tell him what you're going to pay. And you're probably going to get it signed off.

Colin (24:12.74)

Ha ha ha.

Chris (24:19.714)

And it kills brand. You I think this is you become known as a brand that will gouge itself to get rid of its product a few days a year. And then you hold all of it back. You know, you're holding buying back to that point and you get what you want. And the business is arbitrarily hitting target.

Colin (24:19.77)

Yeah.

Chris (24:42.026)

It's not making as much money as it should be. Its brand reputation has been impacted. Its ability to forecast its sales is probably horrendous. Its cashflow is probably really spiky. And all of that is because of the sales target, I think. I mean, arguably, there's a whole other set of systemic failures allowing that to happen. But we said we'd draw the boundary around the target for today's episode.

Colin (25:08.682)

Yeah, yeah, it's almost I'm kind of itching to kind of dig into the that we're obviously going to have to do a comp plans episode now as well. Since you've drawn the system boundary around their episodes so well here. I think we've got that.

Chris (25:17.098)

Let's see how.

Colin (25:26.0)

I you mentioned something earlier when we were doing the research for the episode about this relationship between the comp plans and the targets and talked about rewarding sellers on hitting target rather than every sale. So creating a disincentive to sell beyond target. And it really got me thinking about something that yes, yes, we will go into in detail in the comp plans episode when we get around to doing that.

this idea of rewarding every sale. we, I've worked in organizations that just had, I'm going to use the word again, a maniacal focus on, on net new logos. And we, we won this incredible enterprise account where the customer made a huge like seven, seven figure return on investment, possibly an eight figure return on investment actually for about a five figure.

Chris (26:05.367)

Mm-hmm.

Colin (26:22.928)

outlay, incredible story. We leaned on this case study and them as a sort of customer advocate, like ad nauseam. But the reps were incentivized, all of them on NetU logos. So despite having all the big talk at, you know, sales kickoff about landing and expanding, nobody's actually incentivized to grow that account over five years. So we're using this, the team that we work with to, you

sell to other companies, but not actually within this enormous enterprise account. Because we're not incentivizing to bring it back to the point, we're not really incentivizing every sale. And this is again coming back to, it's kind of slightly blurring the lines between sort of a conversation about comp plans and targets there. So I'll leave it there.

Chris (27:12.93)

Well, yeah, I think it's massively in the system context, isn't it? Because ComPlan is, broadly speaking, why we achieve the sales target as sellers. And, you know, I think there is a...

It's a relationship that you can't necessarily clearly delineate because they are connected. I think we will come on to how they're connected possibly when we talk about what you could do better rather than necessarily, I think, instead in this episode. But I think that is a really, really important point in terms of the what's wrong with sales targets that I don't think this is universally true.

It's certainly not true in our organization. It's certainly not true in some other organizations that I can think of. But I would say broadly speaking that net new is always the focus in most sales organizations. It's acquiring new logos. And the second component of that is that sales targets are

In every, I can't think of any scenarios personally that I've encountered, you will probably encounter more scenarios than me, but where the sales target is not revenue based. And I think that's the, or unit based.

Colin (28:35.44)

Or there are sales incentives certainly set up to heavily skew performance in favor of net new logos. And also when you think about the teams that are supporting sales, I'm thinking SDR teams, for example, will very, very often be, and this is a sort of pet peeve of mine, very often be incentivized and targeted on.

the volume of say meetings they set. And they might call them SQLs or something like that. But a lot of the time there are meetings where you have a good relationship with your sales rep and they want to make sure you get paid. And so eventually what you get is the organization's paying out lots and lots of money for meetings with no, there's no incentive there to focus on meetings which are going to drive revenue or perhaps a really interesting potential customer that's going to have it.

Chris (29:06.816)

Yeah.

Colin (29:31.556)

really a very high value over time. It's just about hitting that number.

Chris (29:36.93)

Or more fundamentally, even a focus on meetings where the people that have been invited will turn up. You know that I think when you talk about having, you know, talking about SDRs, which we will try not to in any detail on this episode. you know, I think that when you talk as we do to customers and say, well, when you're building a comp plan for SDRs, don't pay it all out on meetings booked. And that seems revolutionary, I think, to lots of people, you know, having

Colin (29:43.835)

Yeah.

Chris (30:05.438)

zero compensation in fact for meetings booked and play comping on you know 80 % on they turned up and 20 % on it turned into pipeline that sounds like witchcraft to a lot of organizations but know we digress slightly

Colin (30:17.882)

Yeah, and heaven forbid, revenue be part of the target as well. Yes.

Chris (30:23.074)

Yeah. But I think this sort of caught this focus on revenue, this focus on NetNew logos, you know, that that's endemic in in sales organizations and sales targets. And you lose sight. And this is the growth system on that sort of systematic view of where does revenue come from? Because ultimately, for some businesses, I do get it. know, NetNew is important if you are, you know,

VC backed, seed startup, then probably the most important thing you can be doing is getting some acquiring some logos that people have heard of that you can stick in your website in the people that trust us section. And that probably is more valuable than any margin you would ever make from those deals in the early days when you're, know, you're, riding high on investor money. In the real world, where most businesses live, where they've got to live months to

month, year to year, profit's really, really important. I think it's fair to say. But most sales target structures don't prioritise that at all. And they certainly don't prioritise the whole picture of where incremental revenue can come from. Expansion revenue, lapsed and lost.

etc. There's very little, very seldom focus on those areas that I have seen. I don't know about you.

Colin (31:52.772)

Yeah, I think to be fair, there are other factors at play here where, you know, you hear sales leaders saying, but in our organization, we're supposed to hand over to customer success and X, Y and Z members of our organization or functions within our organization. And that's all part of the customer journey that we are not a part of.

Chris (32:13.739)

Mm-hmm.

Colin (32:15.994)

But I think in practice, I've seen it work a lot better when we have the account executive or account director who's been involved with the sort top level buying committee and really understands and knows them. And let's face it, it's probably been out for dinner and a few drinks with them a few times as well. It's good to keep those people involved.

Chris (32:44.072)

Absolutely.

Colin (32:45.71)

I guess Chris, with this being the growth system, would be remiss of us not to delve into what's going on from a systems view here, a systems thinking view of what's going on with sales targets. And I guess why it could be a problem. And I think that's probably a nice bridge to, well, what can we do instead?

Chris (33:05.75)

Yeah, I will.

Indeed, mean, for once, I don't actually have loads to add in terms of the systems thinking point of view, because I think actually it's almost implied in the topic, you know, our perspective here is you need to take a systematic view of the problem that is always our perspective on things. You know, we could list some of the good old systems archetypes that hopefully the listeners will becoming more more familiar with, you know.

limits to growth, think is a sort of system archetype that we can talk about in the context of sales targets, albeit it might be a little bit of a stretch. You know, I think that the sales targets and the way they get set is almost based on a sort of an infinite.

market potential, you know, we always need to be doing 10 % more, 5 % more, 50 % more, whatever the relevant metric is for your organization, every month, you know, grow or die. It's the capitalist dream. But but actually, you know, the limits to growth archetypes suggest that there is always going to be an entity within either the immediate system boundary of the company, i.e. you can't produce anymore, or you can't support anymore, or

whatever, that there is a pinch in the pipe somewhere in terms of your ability to deliver or deliver well. Or in the market context, in a sort of systems diagram, in the little cloud where stuff comes from and goes to, that actually maybe there's just not that demand in the market or maybe you're in a market that is in decline and therefore the investors are demanding up into the right arrow and the market's going,

Chris (34:52.844)

down and to the right and those two will have a point of intersection, know, that's I think in a nutshell the sort of limits to growth archetype. I think you have an element maybe of sort of shifting the burden, I guess.

Colin (35:07.254)

Yeah, I think that's what I was thinking here. I think maybe because we've just had a... So for the listeners, we're recording this the day after the US general election. I guess at election times, I always think about the shifting the burden archetype, or I guess to the layperson, the kicking the can archetype, where we have this...

In fact, a lot about this episode made me think about politics actually and short term thinking and I guess shifting the burden. In the case of business, we're thinking about essentially relying on aggressive sales tactics as a sort symptomatic solution to temporarily alleviate revenue pressures, much as a government may pull certain levers like interest rates, for example.

in order to temporarily alleviate the symptoms and failing to address underlying issues. In the case of business, could be something like you alluded to market saturation there, or maybe there's a focus goes away from sort of developing the product or ultimately just weakening the organization as a whole from that.

Chris (36:11.969)

Mm-hmm.

Colin (36:23.514)

just that focus on addressing the symptom. There is not enough money in the system. We must sell aggressively in order to fix that. That's probably going to, as you see, give you that up into the right graph when you go for your investor meeting this quarter, but you're going to be left doing the same thing again next quarter. In fact, we saw, were recently, last month, think we were at a conference, we? were a very

Chris (36:32.321)

Yeah.

Colin (36:52.568)

respected for good reasons. Leader of some very successful sales organizations was talking about how he had been in the business for seven quarters and I felt like, almost felt like giving him a hug, you like, well done, you've survived seven quarters, like seven quarters of this sort short term stress of like, you know, and that's probably doing it down a bit. There's been a...

Chris (36:58.528)

I know what you're going to say. This was a shocker to me.

Colin (37:18.116)

fantastic amount of change and kind of structural and strategic change within the organisation in those seven quarters. But I think just that that

Chris (37:28.746)

It shows how endemic it is, that thinking that...

Colin (37:29.08)

think that yeah the mentality is very ingrained to think in quarters right at the longest.

Chris (37:35.84)

Well, mean, that, yeah, that to me was a shocker. That sort of clearly defined in every seller's head that, you know, the quarter is the thing. Actually, slight sort of squirrel alert here, but I knew we were going to talk about quarters. So I thought, I'm going to find out why quarters is a thing. And I honestly didn't, to be honest, come up with a particularly definitive answer, but I thought...

what it seems to be, according to chat GPT and a bit of like Googling, is that quarters actually stem all the way back to the industrial revolution and the concept of piecework and what was he called? Winslow Taylor and his sort of time and motion studies. And effectively in the industrial revolution, places like Mills started measuring their potential unit output in quarters.

can see you're Googling to fact check me here.

Colin (38:34.672)

Yeah, no, no, I just I've slightly embarrassed as someone who's trained as a historian that you have, that you've out-historied me. This is the second time someone called Chris has done this to me in two days.

Chris (38:42.69)

I'm out of history, you? Yeah. mean, well, it's sort of so I think.

Chris (38:54.015)

Well, I think that sort of started off this sort of quarterly focus and then it comes into, I think, is it, I can't remember where it is, is Harvard? I think it says the Sloan School of Management. Well, Sloan, I found out, is the guy that invented ROI in the 20s. And this is kind of where quarters really got some traction because we went from this, like, the world of business went from unit out,

Colin (39:10.991)

Right?

Chris (39:21.218)

output to financial performance in terms of its focus. And they already had this concept of quarterly output. And then it started to merge into a modern accounting practices where people would start looking in quarters. I didn't actually find out when you when the concept of the financial year started. But, you know, that is around the same time, I suspect, in terms of how company taxes get structured and and really gets embedded from all the way back there from,

how many, I don't know, whatever a mill churns out, know, a sort of a bushel of wool or you will know this better than I. But fundamentally that sort of quarterly focus then turned into a focus on kind of ROI and accounting and also the rise of the public company. I think that's something we haven't talked about actually. That's sort of like, there is definitely a public private divide I think in the...

in the focus on quarters and things like quarterly earning statements and so on. anyway, squirrel alert, as I said, but I just thought that was interesting that this seven quarters, this sort of quarterly focus that we all have ingrained in our psyche in business goes back to how many units can one man create in a quarter and therefore what should the target be for every other man that's come into the organization?

Colin (40:45.39)

Yeah, a history lesson for me, I've put to shame here. I was trying to find out while you were talking there what the history of the fiscal year is, but I think I'm gonna have to put that in some notes later for the listeners. Or perhaps somebody can tell us what the history of the fiscal year is. I feel like it'll be something to do with government, or maybe something to do with the British East India Company or the Dutch East India Company, something corporate, but also public.

Chris (40:59.978)

and put it through the cell nights.

Chris (41:08.438)

Plus that activity takes place here.

Chris (41:15.651)

I would say that the East India Company can be blamed for many things and it's quite possible quarterly targets could be one of them.

Colin (41:21.808)

I imagine if they were to blame for the fiscal year as well. That's just...

Chris (41:28.367)

So I guess we are coming on to what to do instead because as always we've had a rangy and long conversation so let's try to wrap this up.

Colin (41:36.004)

Yes, we've torn apart this thing that everyone assumes is just part of life, it's sales targets. We better not leave everyone hanging and should maybe tell them what they might do instead.

Chris (41:45.174)

Yeah.

Chris (41:49.312)

So should we remove sales targets altogether? I think that's a question. I've heard it debated a few times. I think that, well, let me, shall I do the case for removing sales targets altogether? And maybe you can do the against or we'll do that together. So I think that,

If you were to remove sales targets, I would choose my words very carefully here because I don't think, spoiler alert, that removing sales targets altogether is the answer in most places. if you were to remove sales targets altogether, then I think that all businesses are really collections of human beings, orientated in a direction to go achieve something. And

Very seldom does the mental health and whole self when it comes to sales teams get considered. The stress I think and potential for burnout that comes from always be hunting a number, always being under the pump, always needing to perform, always being measured on whether something closed today rather than tomorrow when you get to the end of the quarter. I think that's fundamentally bad for human beings and

There was some research, actually, I looked it up. There's a study in the Journal of Applied Psychology that essentially says there's a direct correlation fundamentally between sales targets and burnout. And also a direct correlation between sales targets and employee turnover. know, sellers that exist in systems that don't make it easy for you to hit your targets have much higher employee turnover. They're always refreshing their organization. always...

and pink cellars, they are generally not great places to be.

Chris (43:44.375)

So I think that that's certainly a point for the prosecution on sales targets. There was also a study I saw, and it has to be said there's not loads of stuff in here, but there's a whole mountain of like how great goals are, you know, driving performance when you get into this. Well, actually, is it all that it cracked up to be? It's a smaller body of research. But there is a study from McKinsey that suggests that when you remove monthly targets, specifically monthly targets,

in this study, there is an increase in essentially customer satisfaction through a focus on long-term relationship building, which I thought was really, really interesting. But ultimately, the suggestion of the study was that monthly sales targets breed aggressive selling tactics which harm customer relationships because they're all being hammered to close now. actually,

customer lifetime value is lower in organizations with monthly targets and customers are less happy, which I thought was pretty compelling. And in a similar theme, although it's possibly not the case for the prosecution, there was another study, Bain & Company, I think it was, that essentially looked at...

know, annual versus monthly and quarterly versus monthly. And ultimately, what it suggested in this one study was that companies that shifted from monthly to I think it was quarterly targets, their performance actually increased by 10 % in terms of revenue, particularly from larger accounts. So I think for me,

Colin (45:27.926)

So increasing the gap between those high pressure end of period days, I wonder if there's a kind of upper limit to that. Like if you change to half year targets as they do at some like DELs, one example for example that I can think of. if you change to half year targets, is there a sort of commensurate increase or when does that increasing that gap sort of cease to?

Chris (45:32.736)

Yeah.

Chris (45:56.95)

That's a really interesting question. And it's one that, you know, in our organization, I'd love to be able to do an A-B test, you know, that's not really gonna work in our org.

Colin (45:57.274)

to bring gains.

Chris (46:08.564)

I would encourage any brave, you know, sales directors, intensive growth out there. You know, if you want to carve your sales team up and put different periods on their targets and tell us how they perform, I'd love to know the answer. I'm afraid I don't have a ready-made study that says it, but there certainly is a correlation there. I also found something else that suggested that this longer period in targets led to better lead qualification and therefore higher close rates.

which I thought was interesting. And it kind of makes sense, doesn't it? If you're always on the treadmill trying to close every single month, then you're going to spend less time in qualification. You're going to be trying to move stuff into deal development, pricing and terms, whatever the pointy end of your sales pipeline looks like. And you're going to hurt your close rate because you're going to be trying to move the deal too fast. You're going to be asking not enough questions.

So I think that that really spoke to me because the picture that these studies started to build in my head at least, I'd be interested to see whether you agree, was it's probably an industry specific question.

I think that if you sell, I don't know, you work in the sales team at Dell selling desktop computers or whatever it is they sell these days at Dell, you know, laptops, and it's units and it's month to month. I suspect that monthly sales targets are probably pretty important in terms of just churning through the numbers. I don't know that to be true. But if you're in long sales cycle, high value,

you know industries, maybe you're selling I don't know enterprise software, pharmaceutical solutions, complex financial products, knows what. I think that monthly quotas

Chris (48:08.022)

don't make any sense there because deals take a long time to develop. Deal cycles can be six, nine, 12 months. What is the point of a monthly target? You're not going to be able to force the issue on a million, 10 billion, 100 million dollar sale just to satisfy someone's idea that we need to do X by Y.

So I think that long gaps between quotas, you know, I think make more sense the longer the sales cycle is, the higher value the deal is. I also think that looking at the sort of systemic view, the system view here, if you purport to be a really customer centric organization, I don't know that you can really make a case for monthly sales targets.

In fact, actually, I was listening to someone else's podcast, which I would give them a shout out because I quite enjoyed it. I can't remember what it was off the of my head, but it suggested that Apple in their retail stores, they have sellers, there are zero sales targets in any store, and they have the most successful electronics retail organization in the world. Now, I think you would argue that there's probably other reasons for that.

the same podcast it said something which I'm not sure whether this is actually true but it said that also most security guards in shops have a sort of revenue recovery target. You know how much can you save from walking out the door? The only target security guards have in Apple stores is keeping the employees safe because they're more valuable than the...

than the kit because that's actually not very expensive to produce. So I thought it was an interesting sort of mindset thing there. And what's supposedly a very customer centric organization, they take that away because they prioritize customer satisfaction, customer loyalty, customer delight over forcing people to buy stuff. So I think there's an interesting perhaps case there for doing something different. Don't know what your thoughts are there or whether you vehemently disagree with any of that.

Colin (50:23.96)

I must confess, I'm finding it hard to make a sort of counter case to that that sales targets as we know them are good. However, and I wonder if I should just kind of fold this into my sort of final thoughts as we're kind of almost at time.

We can't get away from the fact that setting, let's say setting goals, ultimately drives behavior. And therefore we need to think carefully about how we set the goals and why we set the goals and for that to take place. That should happen in, I guess it's not speaking for you too much to say in our opinion, but that should happen in a systematic.

way that we should be and maybe we should be focused less on setting outcome based goals. You should make this much revenue, blah, blah, blah. We should create the system and have process focused goals. So I'm going to take an example from way outside the tech world and the B2B world.

And this is one that so if you're if you're a football fan, you will know this already. And if you're not a football fan, just bear with me. It's actually relevant. So football fans and probably a lot of people who aren't will be well aware of the rise in Manchester City over the last few years. And essentially they are their total world domination, essentially, and certainly domination of England, which is headed to the most competitive league, the Premier League in England. But the way that

The head coach Pep Guardiola, who by the way was hired specifically because of his systematic approach to this. Success is an emergent behavior of his system, which he calls positional play. Essentially, he has the training pitch marked out and divided off a bit like a netball court, essentially, so that everyone knows exactly where they should be at all times. But the point is that he...

Colin (52:36.816)

the goals for his players, he sort of zealously insists that they focus on the execution of the system above all else. And sometimes they win a trophy, sometimes they don't win a trophy, more often than not they do win. But when they don't win, he will stand there and quite honestly tell you that he's happy because everyone...

maybe not every time, but there are certainly a case where would have seen him telling me he's perfectly happy because everyone did what they were supposed to do within the system and there are certain things outside of that that they can't control. And that got me thinking about something that we sort read in the run up to this which was just a few excerpts from James Clear's Atomic Habits. Now don't necessarily agree with everything that James Clear says where he's just like, get rid of goals altogether.

But I really like this quote. said, goals can provide direction and even push you forward in the short term. But eventually, a well-designed system will always win. Having a system is what matters. And committing to the process is what makes the difference. Love that. It's kind of what I'm talking about here. I can't make a case to answer your question. don't worry, I haven't forgotten to answer the question. I can't really make a case for sales targets.

as they are, but I think it's to completely get rid of that would be throwing the baby out with the bath water essentially. can use goals at least to drive behavior and guess adherence to a system and a process and to get people to lean into a process.

and doing things the way that you want them to be done or the way that they should be done.

Chris (54:29.856)

Yeah, I think that is such a good point. And it's the point that I think we made on the last episode, I hope, when we were talking about metrics that, you know, metrics and goals are a great way of shaping behaviors.

There are some studies that argue that they're not. I think that overwhelmingly the evidence is in the favor of goals being a great shaper of behavior. And therefore, I think when we're talking about sales targets, I think the parting thoughts from me, if we kind of get onto them, although this might be a new idea, so not strictly in the summing up, but I think that...

taking a holistic view of how we target performance.

is really important. We talked about the concept of inputs and outputs on the last episode of measuring the things that are wholly in the control of the individual as well as the outputs that you hope to achieve from those. Now, we won't talk about compensation plans, but let's just talk about targets in the sense of we should be targeting system performance, you know, and revenue is an immersion property of system performance. If everyone does

the right thing to Pep Guardiola's point and I love that sort of analogy. We should be happy that everyone's doing a great job and if we're not getting the immersion performance we expect from that, then what we've got is some diagnostic data. If everyone's doing the behaviors and doing the behaviors well, then we know that we either have...

Chris (56:17.5)

specific, you know, if it's one seller's doing the behaviors and everyone else is nailing the target in terms of the revenue and one is not, you might have a specific training need that you need to address. They're just not perhaps saying the right things. If everyone is failing to hit the arbitrary financial number that we have set, then it's either because the number is wrong or because the process is wrong. You know, I think turning

this concept of just pass fail, you know, did by the 31st of the month, we do the right amount of revenue and taking it to being a measure of system performance and having a holistic view of goals. whether you start compensating on those things, I think is an episode in itself. And maybe we should leave that particular point park there for for addressing later.

Colin (56:47.76)

you

Colin (57:12.128)

Yeah, I think as always, although I think we've kind of answered our own questions, we've also ended up asking more questions that we're going to have to do more episodes about. I, as you know, voting. I'm voting. Yeah, there's a kind of matrix structure to this where there are certain common themes that people will notice throughout the series where all these concepts are certainly related.

Chris (57:25.226)

like everything's related.

Colin (57:41.936)

And of course, you know that my vote is to do comp plans soon. I don't mean let's do the comp plan soon. I mean, let's talk about them on the podcast, just to clarify.

Chris (57:54.603)

Well, I think we better be wrapping up as we are actually a little deeper into the episode than we normally are.

Colin (58:01.11)

Unsurprisingly, I suppose it wouldn't surprise the audience to learn that much that when Chris and I have unstructured conversations off air, we also tend to overshoot the time we have available as a matter of course. Let's say we should probably set our meetings to be like one hour or five minutes or that's maybe a conservative estimate to be fair. But yeah, as Chris said, that's all we've got time for today. Another interesting episode looking forward.

Chris (58:22.152)

You

Colin (58:30.766)

to the next one. The growth system is brought to you by RevSpace, which is an applied growth consultancy that connects B2B organizations with the future of growth offering consultancy, education, and applied delivery services. Don't forget to follow and rate the podcast. It really helps us to bring the content to a wider audience. And we'd really appreciate a moment of your time to tell us what you think. And actually, feedback like that is what's sort of

helped us to refine how we did this episode. It's much, much appreciated, very useful to us. Thank you. Goodbye.

Chris (59:04.32)

Yeah, big, yeah, much, appreciated. Thanks, everyone.