What can salespeople learn from the Wells Fargo scandal?
First, a recap –
At this writing, the Wells Fargo CEO John Stumpf has resigned. His departure comes after it was revealed that the bank he managed was fined more than $185 million for allegedly opening more than 2 million bank accounts or credit cards without people’s knowledge or consent.
The fake accounts were opened because salespeople were under pressure to meet cross-sell quotas. Each salesperson had to cross-sell at least 8 accounts per customer. If they didn’t achieve their goals, they were fired.
Or, as Senator Elizabeth Warren (D-MA) said at a Senate hearing last month to Mr. Stumpf – “You squeezed your employees to the breaking point so they would cheat customers and you could drive up the value of your stock and put hundreds of millions of dollars in your own pocket.”
So what’s the lesson here?
Answer: Don’t create unrealistic quotas.
There is nothing wrong with quotas, per se. You want to motivate your salespeople to achieve their goals. And frankly, most salespeople want something they can shoot for. It makes the job more interesting and exciting. From a company point of view, you want to drive revenue. What better way of doing that is by putting a carrot on the stick, and encouraging salespeople to chase after it.
The problem occurs where you create quotas that are so unrealistic or aggressive, that salespeople are forced to lie in order to survive. In the short-term, salespeople will keep their jobs, but in the long-term, the scam will be discovered and people will be fired. Not to mention having your company’s reputation torn to shreds.
For example, I once worked for a publishing company that sold printed bid information to construction companies (this was before the internet was popular). In order to get a complete order, the customer had to sign a contract. So you would fax the contract to your client. Get his signature. And then that’s it – a new customer! Nothing wrong there. This is a standard practice for a lot of publishing companies that sell premium information services.
However, one new salesperson felt he couldn’t reach his quota. I’m unsure why this was the case. Maybe he didn’t receive the proper training, maybe he was lazy, maybe he wasn’t confident, maybe he felt the quota was too high, but for whatever reason, he decided to lie. He gave his manager contracts with fake signatures. Eventually, the home office caught on when they started receiving a lot of complaints from angry customers. The salesperson was terminated and his manager was reprimanded.
Setting quotas isn’t rocket science. But sometimes you feel like you have to be a rocket scientist to set quotas.
Why “Eight is Great” – because it rhymes? Really?!? You must be joking. But that’s how Wells Fargo decided to set their quota for low paying, overworked, stressed-out salespeople who had to grind out their numbers or get canned.
Is that anyway to work?
So how do you go about setting sales quotas?
Some say don’t have any quotas. But if you don’t have any quotas you’re only going to encourage laziness among your sales team. Or worst, you’re going to attract poor or mediocre salespeople who don’t have an incentive to make a good living. You know the type – they come to work late, take long lunch breaks, play computer games at their desk, and only make enough sales calls to barely break even.
The other problem with working without a quota is that salespeople have no power. Think about this for a minute. If you don’t have a quota, then it’s going to be very difficult to persuade your boss to purchase tools to help you sell better. From your boss’s point of view, why should he invest money into his sales team if they don’t have any quotas to meet. Don’t like using Excel spreadsheets to manage your accounts? Too bad. He’s not going to purchase Salesforce.com to help you.
See my point?
So if having quotas is the answer, how do you set them? Here are some suggestions –
1). Get salespeople involved. Quotas shouldn’t be handed down from Mount High by an out-of-touch CEO or the Finance or Marketing Team. You need to get input from your sales team and their management. Since salespeople are serving on the front lines every day, they usually have a better sense of the market, their customers, and their competitors.
2). Not all salespeople are created equal. Each salesperson has his own pipeline and defined territories or market segmentations when it comes to selling. As a result, not all territories or market segmentations are going to be equal. Depending on what you’re selling, some territories may have more prospects than others, and some market segmentations may have more money than others. For example, a salesperson selling to academic institutions may have a tougher and longer time to close sales vs. another salesperson selling to for-profit companies. A salesperson selling in California is going to have an easier time finding a lot of prospects compared to someone selling in Maine.
3). History is not always a good predictor for the future. Times change. Market conditions may be worse now than ever before. You are fighting against more competitors. The quality of your products or services was recently rated badly by an independent publication. The Marketing Department isn’t providing the high quality prospects that you obtained last year. For whatever the reason, past performance doesn’t always equal better future results. Take a hard look at your data before setting quotas. Just don’t come up with an arbitrary number and expect everyone to meet it.
4). Consider using sales forecasting/quota setting software. Rather than come up with “pie in the sky” numbers, why not use software to determine quotas.
Here are some examples of what’s on the market –
To help you further, here are some helpful articles about setting quotas –
“Tough Truth about Quotas,” by Renee Houston Zemanski
“How to Use Sales Metrics to Set More Accurate Quotas,” by Cara Hogan
“Sales Operations and Quota Setting: Use the Right Data,” by Joseph Schroeder
Whatever you do, please don’t base your sales quota on how it rhymes. Because if you do anything illegal or unethical, your next rhyme may be —
“I’m in jail, where’s my bail?”
Note: If you like my post, please read my book Advice for New Salespeople: Tips to Help your Sales Career.