Set bottom-up monthly goals, collect the right sales-floor metrics, create a detailed plan and provide daily feedback to supercharge your sales force.
Sales Management by Joe Capillo
If you can create a goal achievement culture in your sales department, you can structure information gathering, strategic sales process development, salesperson training, management training, and performance coaching in a seamless approach to achieve your most aggressive revenue goals.
Step 1: Create a Goals-Driven Culture
You can create a goals-driven culture by placing goal setting at the top of your list of things you commit to, care about, talk about, work on, report on, and celebrate when you achieve them.
There are two very different ways to go about doing this. You can focus on working with individual employees’ goals, or broader store goals. Experience shows that the people-centered way of managing works better. Since people make up your business and generate all of your revenue, it is a more logical and rewarding way to work.
Step 2: Connect to the Goals of Your People
If you’re a store owner or sales manager, the goals you set are irrelevant to your salespeople insofar as their realization may not provide the level of income they want to achieve. Most salespeople don’t achieve the level of income they desire for three reasons: First, they set their goals too low based on their past performance; or they base them on goals assigned to them by management. Second, they may not understand the month-by-month goals or the flow of business through the year that has to be followed to get to their goal. Third, they have no one to coach them along the way.
It’s far easier to coach people to the goals they set for themselves than to force them to accept goals set for them. Leaders get people to reach their goals, whereas goals set by management are called quotas. When you ask people what they want for themselves, their “wish” goals are always higher than you would set for them. For that reason, the best retail managers challenge sales associates to achieve their desired income goals and make them management’s goals as well. They impact the process not by setting quotas but by showing their employees the way.
Step 3 – Understand Each Sales Associate
Some people are great at selling custom-covered upholstery, or for that matter,
any kind of upholstery. Others are not. Some retail sales people are great at selling bedroom furniture. You have to know these things, because if, like most stores, bedroom furniture accounts for 20%+ of your annual sales, everyone has to be good at it. I think you’ll be surprised at the variances in different sales categories among individuals on your staff.
Step 4: Commission Rate Variances
If you offer a base commission rate plus higher rates on some product categories such as fabric treatments, warranties, higher gross margin goods, and certain product add-ons, or if you reduce the base rate for financed sales or other reasons, your people will be compensated differently for the same total dollars of sales generated.
I’ve seen variances as high as 15% due to, for example, a salesperson’s skill at selling a high percentage of fabric treatments, warranties, and product add-ons. That’s the difference between paying an effective commission rate of 6.5% versus 7.5%. The effect of this in dollar terms is that if salesperson A sells $600,000 worth of merchandise she will earn $39,000 while salesperson B who sells the same value of goods, but in a different mix, will earn $45,000. To earn $45,000 selling her way, A would have to sell $692,000 in merchandise.
Knowing this, your sales manager/coach can implement training and coaching initiatives to improve skills in those areas which you bonus. This benefits both the store and salesperson because these items provide far higher profits than other core products. This kind of variance is particularly prevalent in companies that pay commission based on gross margin. The higher earning people always generate more gross margin dollars on the same sales revenue.
Step 5: Write a Detailed Plan for the Year
If your past history shows that you do 10% of your business in January, that usually means that you see 10% of your customer traffic in January. Further, if you know you usually do only 7% of your business in May, then plan for that in your individual goal development. Most managers would say that in order for a salesperson to earn $40,000 at 6% commission including bonuses (as described earlier), he or she would have to sell $666,667 in the year. Always make sure to specify written business for two very important reasons. First, you have to write it before you can deliver it, and second, written business is what you manage every day on the selling floor.
Taking this to the next level, many managers would divide the $666,667 by 12 and come up with a monthly goal of $55,556. However in January this person would actually have to sell $66,667 or 10% of the year’s total to be on pace with the flow of traffic. He’d think he won when, in fact, he didn’t. So, the lesson is to know your flow of business and set your monthly individual and store goals that way.
The prerequisite for creating a detailed plan is to collect appropriate metrics. You will need to prepare detailed plans for each category of furniture you sell, so you will have to track your customer traffic by category to calculate close ratio by category. This metric will vary widely among categories and salespeople. Another part of the plan has to calculate performance in those categories and products that provide the highest rates of pay for people, such as fabric treatment, warranties, high gross margin products, etc. If you perform room planning projects or design projects for customers, set specific goals for these projects. You need to set a plan for each person according to their performance history and your store history using your high performers as the model.
Step 6 – Provide Daily Feedback to Everyone
If you want to get where you’re going, you have to know where you are every step of the way. Our goals are monthly goals. You make a year by making each month along the way. It’s a 12-step program for furniture people. Account for the make-up of deficits by carefully diagnosing performance problems.
Don’t think that weekly reports will suffice, because you will fail. Weekly feedback gives you only three chances to do this because by the time the final week is over, it’s too late to take any effective action to change performance.
Follow these steps and commit yourself to getting your people to their goals and you will succeed most of the time. Some people will exceed their goals and others will exceed all past performance levels. The result for store owners will be that you will create a goal-driven culture and find that your people will stay on longer and your company will be easier to manage with everyone on the same path to high performance.