“Stretch” goals for salespeople are a common practice we see when working with sales leaders across industries. We hear many justifications such as “we need to push people to perform at a high level,” “we don’t pay for mediocrity” and “we need to leave a buffer so that even if salespeople don’t hit their number, we’ll still hit our corporate objective.” While many of these rationales may sound okay at first glance, the logic is almost always flawed. Unfortunately, this is a regular practice in the hospitality industry and it is likely hurting rather than helping top-line sales.
Goals are an important tool on which to base an incentive plan and manage overall performance. Good goals communicate a clear expectation and drive salespeople to perform at a high level. But poorly set goals hinder motivation and undermine the incentive plan, which can lead to low salesperson engagement, poor sales results and high salesperson turnover.
We recently collaborated with HSMAI (Hospitality Sales and Marketing Association International) on the first Incentives Practice Research Study for the hotel industry. One of the key findings from the study was an alarming lack of satisfaction with the state of sales incentives and one of the primary contributors to this poor satisfaction was the low average goal attainment for the average hotel salesperson. What we found was that the average hotel sales and revenue management professional falls short of hitting his or her goal, earning only about 70% and 80% of their target payout as a result.
Overly aggressive goals undermine even the best-designed incentive plans. Most plans are designed with thresholds below which little, if any, money is paid. Many plans also include accelerators that increase the payout rate above target. With appropriate goals, these features drive performance. But with overly aggressive goals, they actually demotivate. When a large proportion of the sales force is below threshold or “out of the money,” they are effectively disengaged and the tendency can be to do the bare minimum and hope for an achievable target next cycle. Worse still, the temptation can be for salespeople to push sales into the future, hoping that it will help them get “into the money” next cycle.
One clear sign of poor goal setting is when an organization has a history of repeatedly missing its targets. Another is when we see significantly more than 50% of salespeople missing their target. Many hotels miss their targets year after year, yet continue to set overly ambitious goals. The belief is often that the hotel is underperforming relative to what it should be producing, but even so, setting realistic targets is likely to help, rather than hinder, performance.
To be fair, challenges exist to setting fair and motivating targets in the hotel industry. Budgeting and goal setting typically involve a variety of stakeholders, including hotel leadership, owners, brands and management companies. The ideal solution is to get alignment across all these stakeholders on the need for realistic goals. When not possible, setting sales goals independently from the overall hotel budget may be an option.
The practice of aggressive goal setting is well entrenched in the hotel industry and isn’t likely to change overnight. However, hotels that ensure their goals are fair and motivating are likely to have more engaged and motivated salespeople, leading to better results.