Academic journal article Review of Business

Sales Quotas: Critical Interpretations and Implications

Academic journal article Review of Business

Sales Quotas: Critical Interpretations and Implications

Article excerpt

Accomplishing sales objectives is a critical activity of sales organizations. Effected through the assignment of sales quotas, their impact on the firm can be enormous. Yet, despite the key role of sales quotas, very little is known about their use within marketing organizations. To address this issue, this article explores what levels of sales quota performance result in management evaluation of strong, average, and poor performers. From this basis, the consequences of salespeople who fail to make sales quotas are then examined.

Justin March [of Canton Media] missed his quota -- again. Every month since being hired six months ago he has sold 60 or 70 percent of quota, but he just can't seem to get any higher. His manager, Tom Dooley, knows March possesses the skills to be a star performer (he hired March with high expectations), so he's been patient. After looking over this month's numbers, Carlton's vice president of sales, Sarah Watts, told Dooley to give March three months to make his numbers; if he can't, fire him. Dooley is sure March will improve; after all, he's a natural once the account is established. Should Dooley keep investing his time in helping March to improve? Should he let March try to prove himself on his own? Or is there a better approach? [22].

Accomplishing sales objectives is a critical activity that provides the basis for individual (salesperson) and organizational (firm) success [e.g., 2]. Correspondingly, falling to reach sales goals may create negative impacts to both the salesperson who failed to make the goal, and to the firm who relies upon his/her success. These sales goals are typically referred to as sales quotas, representing the primary sales objective for salespeople and sales managers, as well as one of the most important issues of the selling profession [12].

While quotas typically are used for evaluation (i.e., objective accomplishment), and control (i.e., directing sales efforts), they also serve as motivators. In this vein, research suggests that goals, such as quotas, can serve as n motivating force, and may positively affect effort and performance [4, 5, 17]. Yet, despite their importance, only limited anecdotal information about the use of quotas is available [8, 11]. Therefore, given the ongoing interest that exists in understanding sales performance, it is important to extend our understanding of sales quotas, both from academic and practitioner perspectives. For example, can general observations be made about sales quotas and their usage, or are they unique performance assignments, which prohibit interorganizational comparisons [e.g., 6, 24]?

Given the general lack of clarity surrounding sales quotas, the purpose of this article will be to examine several key issues as they relate to sales quotas, by assessing salespeople's view on these assignments. This includes an investigation of the role of sales quotas in assessing salespeople's level of performance, as well as the development of an understanding of the linkage between performance and sales quotas. The consequences to salespeople who fail to obtain a satisfactory level of quota performance will also be examined. These findings, and the corresponding managerial implications, are designed to expand the general level of knowledge about sales quotas, and in turn, provide a stronger basis of information for managerial decisions addressing them.

Sales Quotas: Meaning and Purpose

In their most basic format, sales quotas represent an objective for the sales unit that is widely accepted as a standard of performance measurement [12]. For instance, if a salesperson is assigned an annual sales quota of $480,000, this suggests that she must average about $40,000 in sales per month. While sales quotas may be assigned to an individual person (e.g., salesperson, sales manager), the assignment may also be for a group of individuals (e.g., a sales district). Under such usage, sales quotas are typically used as both an indicator of performance level and a mechanism to provide seller motivation [8, 15]. …

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