Setting targets for a sales director
Discussion
Hi everyone, asking for assistance from people involved in sales (rather than just general opinions please - fingers crossed)
When setting targets for sales managers and directors (i.e. People who manage teams of individual contributors), do you give targets based on sum of the sales people, or more, or less? For example, ten sales people each with a target of £10, do you give the sales director a target of:
The sum: £100?
Less: £80?
More: £120?
There is logic behind all three but keen to hear what is normal amongst sales professionals, of any industry.
Many thanks
When setting targets for sales managers and directors (i.e. People who manage teams of individual contributors), do you give targets based on sum of the sales people, or more, or less? For example, ten sales people each with a target of £10, do you give the sales director a target of:
The sum: £100?
Less: £80?
More: £120?
There is logic behind all three but keen to hear what is normal amongst sales professionals, of any industry.
Many thanks
I'm not sure there are any legal considerations, unless a particular structure is specified in someone's contract, but my suggestion would be a scheme that is based on all the target revenue that the Sales Director is accountable for, which begins to pay out when about 90% of that is achieved, hits a competitive OTE level when target is reached and then pays at a higher rate for above target.
Thanks Ironingman
Agree with this approach, the question was whether than revenue number should be the sum, or more or less than the total of their sales team.
For example, if less then they aren't relying on every single one of the team to meet target in order for them to be paid
If the sum then they need all their team to hit target for them to be paid
Of more than the sum, they are reliant on some of the team over achieving in order to get paid, or being classified as a "player manager" and being expected to compete with their own team and win their own individual deals.
Many thanks
Agree with this approach, the question was whether than revenue number should be the sum, or more or less than the total of their sales team.
For example, if less then they aren't relying on every single one of the team to meet target in order for them to be paid
If the sum then they need all their team to hit target for them to be paid
Of more than the sum, they are reliant on some of the team over achieving in order to get paid, or being classified as a "player manager" and being expected to compete with their own team and win their own individual deals.
Many thanks
It should be more.
If its the sum or less than he is going to miss as if set correctly not everyone will get there with a typical sales team someone would miss, that’s life.
In this case they need a buffer to carry that person so being higher than the sum if someone misses he still hits.
If its the sum or less than you are setting him up to fail.
He doesnt need to be a player manager to succeed if he manages staff correctly he will get more out of the weaker performers and an over achievement out of his top performers thus hitting the target.
Should add targets and pay shouldn’t be linked i.e dont only pay him when he hits target, it should come in earlier as previous poster mentioned.
If its the sum or less than he is going to miss as if set correctly not everyone will get there with a typical sales team someone would miss, that’s life.
In this case they need a buffer to carry that person so being higher than the sum if someone misses he still hits.
If its the sum or less than you are setting him up to fail.
He doesnt need to be a player manager to succeed if he manages staff correctly he will get more out of the weaker performers and an over achievement out of his top performers thus hitting the target.
Should add targets and pay shouldn’t be linked i.e dont only pay him when he hits target, it should come in earlier as previous poster mentioned.
Edited by interstellar on Tuesday 12th December 06:50
I'd want a senior person to deliver a gross margin figure as well as a revenue target. No point in his team smashing revenue out of the park because they spend all day discounting to get the business.
The sales director's target should be driven by the business plan and budget set by the board. The sales director ought to be the one setting the targets for and designing the make up of the sales team.
I would want his or her remuneration to be a relection of performance against the company targets and budget, rather than an amalgamation of those working for them.
The sales director's target should be driven by the business plan and budget set by the board. The sales director ought to be the one setting the targets for and designing the make up of the sales team.
I would want his or her remuneration to be a relection of performance against the company targets and budget, rather than an amalgamation of those working for them.
As stated, it should be at least equal to that of his team. Some other points to consider.
Think about uplifts. I.e. Paying extra for selling using finance for SD and the team. If you want to encourage this then all their targets should be uplifted too.
Think about gates. I.e. Below 40% of target pays nothing then linear up to 100% then 2x above.
Think about a second element. I.e. Profit for the SD. So say 40% of OTE on revenue, 35% on profit retaining 25% for individual challenges I.e. If a big deal comes along and you want to give extra incentive. Profit keeps the SD from pricing too low, especially if they are setting the pricing structures.
Think about when teams get paid commission above the gate. Monthly, quarterly? Monthly encourages teams to close the deal asap as they get paid quicker.
Think about length of sales plans. 6 months or 12? 6 gives you more flexibility to react to changes in market conditions.
If the above is of any use, drop me a PM. Happy to expand.
Think about uplifts. I.e. Paying extra for selling using finance for SD and the team. If you want to encourage this then all their targets should be uplifted too.
Think about gates. I.e. Below 40% of target pays nothing then linear up to 100% then 2x above.
Think about a second element. I.e. Profit for the SD. So say 40% of OTE on revenue, 35% on profit retaining 25% for individual challenges I.e. If a big deal comes along and you want to give extra incentive. Profit keeps the SD from pricing too low, especially if they are setting the pricing structures.
Think about when teams get paid commission above the gate. Monthly, quarterly? Monthly encourages teams to close the deal asap as they get paid quicker.
Think about length of sales plans. 6 months or 12? 6 gives you more flexibility to react to changes in market conditions.
If the above is of any use, drop me a PM. Happy to expand.
Edited by ziggy328 on Tuesday 12th December 08:10
We set a sales budget, which is worked back from an expected EBITDA, then fixed costs.
This is then uplifted by 25% to set a sales target
This sales target is split around the sales team
So the company expects to achieve budget, but sales team are motivated to achieve target.
Sales director is a bit different - they should earn a higher proportion at budget but plenty more at target.
This is then uplifted by 25% to set a sales target
This sales target is split around the sales team
So the company expects to achieve budget, but sales team are motivated to achieve target.
Sales director is a bit different - they should earn a higher proportion at budget but plenty more at target.
janesmith1950 said:
I'd want a senior person to deliver a gross margin figure as well as a revenue target. No point in his team smashing revenue out of the park because they spend all day discounting to get the business.
The sales director's target should be driven by the business plan and budget set by the board. The sales director ought to be the one setting the targets for and designing the make up of the sales team.
I would want his or her remuneration to be a relection of performance against the company targets and budget, rather than an amalgamation of those working for them.
Too many other factors affect gross margin - simpler to have bulletproof policy rules on discounting/incentives.The sales director's target should be driven by the business plan and budget set by the board. The sales director ought to be the one setting the targets for and designing the make up of the sales team.
I would want his or her remuneration to be a relection of performance against the company targets and budget, rather than an amalgamation of those working for them.
Not really. Sales is about profitability. If the cost price of your goods or service goes up, you need to be able to recover margin to maintain the business plan target. If the sales price cannot realistically be increased to maintain margin, then the business plan and the targets need adjusting. In either case, the sales function needs to be remunerated based on the earnings of the business rather than the revenue.
livinginasia said:
Thanks everyone, gross margin would be nice but unfortunately our finance people arent able to track that (don't ask!)
OK - I won't ......but are you saying your finance people don't know how much profit is being made per order? How do they not know the sales teams are selling the company into to ground?A decent sales director will be able to submit a forecast to the CEO / MD that is accepted or discussed, the SD is then given the performance budget for the team and sets it himself. The MD / CEO will set a bonus for the SD based on KPI`s as well as raw £ if I was a SD and treated as your first post I would suggest you looked for a sales manager not a director.
Edited by DSLiverpool on Tuesday 12th December 13:26
Thanks again for all your suggestions, to answer a couple of points, the company is a huge organisation that makes very large profits from its home market. This question relates to the "international" part of the company that makes a fraction of a % of the company revenues today, therefore the profitability is very hard to measure (apparently) as a lot of costs are pushed back into the home market (product, engineering, delivery, marketing, Helpdesk, software development etc) but the revenues are generated overseas. It just means its very hard to judge how much cost is involved as these are all shared resources with "the mothership"
Pricing is governed by the pricing team who work to a set criteria so the sales people can't drive pricing down to loss making levels.
But that is really not relevant, the question was really around targets (be they Revenue, ebitda, even KPIs) - should the sales team leader have a sum of all the team's individual targets or be higher or lower. For kpis for example, the sales team may have a kpi around speaking at events, should the team leader have a kpi around the sum of the team or have an additional individual target to hit on top of the team.
I get the general feedback is that the sales leader should not have an individual target but be at the most, a sum of the team as undoubtedly one or two members of the sales team are likely to fail. It's unusual to have every single sales person achieve or over achieve targets
Thanks again everyone, this has been extremely helpful
Pricing is governed by the pricing team who work to a set criteria so the sales people can't drive pricing down to loss making levels.
But that is really not relevant, the question was really around targets (be they Revenue, ebitda, even KPIs) - should the sales team leader have a sum of all the team's individual targets or be higher or lower. For kpis for example, the sales team may have a kpi around speaking at events, should the team leader have a kpi around the sum of the team or have an additional individual target to hit on top of the team.
I get the general feedback is that the sales leader should not have an individual target but be at the most, a sum of the team as undoubtedly one or two members of the sales team are likely to fail. It's unusual to have every single sales person achieve or over achieve targets
Thanks again everyone, this has been extremely helpful
start with the highest target and work backwards assuming not all of the team will hit their number.
this roll-up of the team to the director will always be higher than the directors number. This is repeated in larger organisations top to bottom.
so using your example.....
director target - 100
10x sales person target of 15 each.
this roll-up of the team to the director will always be higher than the directors number. This is repeated in larger organisations top to bottom.
so using your example.....
director target - 100
10x sales person target of 15 each.
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