The most effective goal setting is "bottom up." It may start with a conversation like this:
Bill: How much do you want to make next year?
Bill: What would you do if you made that kind of money?
Jeff: Buy a new car, a Mercedes Benz S500.
Bill: Hang a picture of that car on your wall.
That was the conversation with my manager. We did the math; based on our commission structure, I would need to make $512,000 in sales to make $100,000. It felt like a huge goal. I started calculating: One client at $512,000, two clients at $256,000, eight clients at $64,000, and so on. Billing $512,000 in a year seemed like a daunting task, but finding 16 clients to spend roughly $2,500 a month with me seemed more than achievable.
Edwin Locke of the University of Maryland and Gary Latham of the University of Toronto spent years researching goals and goal-setting. Their "Goal Setting Theory" shows some clear relationships:
? High goals lead to greater effort and/or persistence than do moderately difficult, easy, or vague goals.
? Goals direct attention, effort, and action toward relevant actions at the expense of non-relevant actions.
? Because performance is a function of both ability and motivation, goal effects also depend on having the requisite knowledge and skills.
? Goals may simply motivate one to use one's existing ability, may automatically "pull" stored task-relevant knowledge into awareness, and/or may motivate people to search for new knowledge.
There can be no doubt about the impact of goals on performance. In my ? much less scientific ? experience, for goals to be effective, they must be:
? Specific: "Sell more than last year" doesn't cut it. "Bill $512,000 next year" is specific.
? Measurable: Review progress each day, week, and month.
? Achievable: Not easy, but the goal must be possible.
? Personal: There must be an emotional reason for achieving the goal.
Warning: Good goals are based on good information. Do not set goals for the future until you have examined the past.
The "Pareto Principle," commonly referred to as the "80/20 rule," is a great place to begin an analysis. To examine the past:
? Complete an 80/20 analysis of your current billing.
? Identify the types of customers who make up your billing: committed/base customers, seasonal, renewal, and trial or new business.
? Determine your average dollar per client.
? Project from your current list what you expect next year.
? Compare that number to your goal to identify the gap.
Gap reduction comes from getting current clients to spend more, as well as finding new clients. Getting current clients to spend a little more has a dramatic effect: If you have 40 clients spending an average of $3,000 a month and each spent just $150 more per month, you would increase your annual billing by $72,000. Finally, determine how much prospecting and new-business development you will need to close the gap.
The second part of the goal-setting process involves accountability and tracking. These are Locke and Latham's "key moderators":
? Feedback: needed in order to track progress.
? Commitment to the goal: a personal desire to make it happen.
? Significance: identifying the goal as important.
Sales truth: Activities lead to results. Whether the results are positive will be determined by the quality and quantity of the activities.
Annual goals should be broken down by quarter, quarterly goals by month, monthly goals by week, and weekly goals by day. Your goals should consist of both financial components and the activities to make those numbers reality.
Sales managers, complete this process with each seller to determine a station or cluster goal. Your gap management will include getting more from current sellers and/or getting more sellers.
I exceeded the goal my manager and I calculated, and bought the Mercedes. (In my defense, I was young, and material goals were important to me at the time.) With careful analysis, planning, and constant feedback, you can achieve your goals.
Jeff Schmidt is EVP and Partner at Sparque, Inc. E-mail him at email@example.com
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