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Economy

Sales Goals In An Uncertain Economy: Mistakes Can Sabotage Profits – Forbes

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Uncertainty about the economic outlook makes setting sales goals unusually difficult and also illustrates some of the flaws of traditional approaches to the problem. The economy is likely to show good growth in 2021 as Covid-19 vaccinations increase, but the timing and extent of the economic recovery are far from certain. They depend on the current surge of the virus, the production and distribution of the vaccine (not an easy task), the effectiveness of the vaccine and social attitudes regarding vaccination and social distancing as the pandemic abates.

Common approaches to setting goals for sales representatives depend on a forecast of how much sales are possible, which for most organizations depends, at least in part, on the economy. (The exceptions include new products in which changes in market share will swamp overall market fluctuations, some government procurement and other items whose buyers are impervious to economic changes.)

Why not take a guess at sales, bump it up a bit to a stretch goal, and call it good? Goals that are much too low don’t motivate sales people. They hit their goals early in the year and coast thereafter. Goals that are too high also don’t motivate people once they learn that their goals are not achievable. The ideal goal is achievable, but only through strong performance. But when managers don’t know how much is achievable, setting a revenue target is dangerous.

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One alternative to a results-based sales goal is a sales activity goal. In many situations, successful sales people use the funnel concept: make calls, set meetings, develop proposals and then close sales. The specific steps vary with type of sales activity. Setting activity goals for these steps ensures that representatives are doing the things that need to be done to achieve sales. This is often a good tool for beginning representatives in a situation where the manager can benchmark activities of the most successful veterans. The new representative is told what steps to take to achieve success. This leaves out the skill with which each activity is conducted, but at least it motivates activity.

Unfortunately, a common way to set sales activity goals simply works backwards from the dollar sales goals, calculating what that means for sales calls, meetings, etc. The activity goals simply become another way to set a sales goal, subject to all the uncertainty of the economy.

Activity goals can also lead to counterproductive behavior. Fred procrastinates on his activity goals, knowing he can make his needed calls the last week of the month. But one of those calls turns out to be a hot prospect who wants further information as soon as possible. Fred’s achievement of his activity goals conflicts with what needs to be done to land a sale. This sort of conflict will not happen all the time, but managers should be aware that sales reps invariably learn how to game whatever incentive system is used.

A hybrid approach requires hitting activity goals when actual sales fail to meet dollar goals. A representative who is making the calls deserves compensation even if the sales environment is exceptionally tough. With traditional funnel activity goals, though, calls could be easy, but the next steps may be difficult. Prospects who will not buy soon don’t want to set up meetings or request proposals. Sales reps would do better accepting this reality and making more calls, even if that means missing some of the late-stage goals.

The difficulty of setting goals for sales people raises the question: Why have goals at all? Perhaps compensation should be simpler, such as a simple commission, so that hitting some arbitrary number doesn’t make the sales person better off financially. Getting the mix of base salary and commission right is difficult and requires an understanding of what normal sales could be, but that’s easier than predicting 2021 sales.

Athletes improve their performance with goals that are S.M.A.R.T.: Specific, Measurable, Attainable, Realistic, and Time-based. A soccer player might set a specific goal to improve endurance, while a swimmer might focus on turns for a season. Such goals are specific to the particular athlete. Sales representatives can use the same approach individually, which could mean writing proposals that close more sales by the end of the second quarter. This is valuable but different from the broad goals common in sales teams.

With the fluid economic environment, locking representatives into year-long goals based on a guess as to the market strength will likely set up failure. Compensate representatives for both performance and activity, and monitor the economic environment on a monthly basis.

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Economy

Canadian economy starts the year on a rebound with 0.6 per cent growth in January – CBC.ca

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The Canadian economy grew 0.6 per cent in January, the fastest growth rate in a year, while the economy likely expanded 0.4 per cent in February, Statistics Canada said Thursday.

The rate was higher than forecasted by economists, who were expecting GDP growth of 0.4 per cent in the month. December GDP was revised to a 0.1 per cent contraction from zero growth initially reported.

January’s rise, the fastest since the 0.7 per cent growth in January 2023, was helped by a rebound in educational services as public sector strikes ended in Quebec, Statistics Canada said.

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WATCH | The Canadian economy grew more than expected in January: 

Canada’s GDP increased 0.6% in January

41 minutes ago

Duration 2:20

The Canadian economy grew 0.6 per cent in January, the fastest growth rate in a year, while the economy likely expanded 0.4 per cent in February, Statistics Canada says.

“The more surprising news today was the advance estimate for February,” which suggested that underlying momentum in the economy accelerated further that month, wrote CIBC senior economist Andrew Grantham in a note.

Thursday’s data shows the Canadian economy started 2024 on a strong note after growth stalled in the second half of last year. GDP was flat or negative on a monthly basis in four of the last six months of 2023.

More time for BoC to assess

The strong rebound could allow the Bank of Canada more time to assess whether inflation is slowing sufficiently without risking a severe downturn, though the central bank has said it does not want to stay on hold longer than needed.

Because recent inflation figures have come in below the central bank’s expectations, “it appears that much of the growth we are seeing is coming from an easing of supply constraints rather than necessarily a pick-up in underlying demand,” wrote Grantham.

“As a result, we still see scope for a gradual reduction in interest rates starting in June.”

WATCH | Bank of Canada left interest rate unchanged earlier this month: 

Bank of Canada leaves interest rate unchanged, says it’s too soon to cut

22 days ago

Duration 1:56

The Bank of Canada held its key interest rate at 5 per cent on Wednesday, with governor Tiff Macklem saying it was too soon for cuts. CBC News speaks with an economist and a couple who might be forced to sell their home if interest rates don’t come down.

The central bank has maintained its key policy rate at a 22-year high of five per cent since July, but BoC governors in March agreed that conditions for rate cuts should materialize this year if the economy evolves in line with its projections.

The bank in January forecast a growth rate of 0.5 per cent in the first quarter, and Thursday’s data keeps the economy on a path of small growth in the first three months of 2024. The BoC will release new projections along with its rate announcement on April 10.

Growth in 18 out of 20 sectors

Growth in January was broad-based, with 18 of 20 sectors increasing in the month, StatsCan said. The agency said that real estate and the rental and leasing sectors grew for the third consecutive month, as activity at the offices of real estate agents and brokers drove the gain in January.

Overall, services-producing industries grew 0.7 per cent, while the goods-producing sector expanded 0.2 per cent.

In a preliminary estimate for February, StatsCan said GDP was likely up 0.4 per cent, helped by mining, quarrying, oil and gas extraction, manufacturing and the finance and insurance industries.

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Economy

Yellen Sounds Alarm on China ‘Global Domination’ Industrial Push – Bloomberg

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US Treasury Secretary Janet Yellen slammed China’s use of subsidies to give its manufacturers in key new industries a competitive advantage, at the cost of distorting the global economy, and said she plans to press China on the issue in an upcoming visit.

“There is no country in the world that subsidizes its preferred, or priority, industries as heavily as China does,” Yellen said in an interview with MSNBC Wednesday — highlighting “massive” aid to electric-car, battery and solar producers. “China’s desire is to really have global domination of these industries.”

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Opinion: The future economy will suffer if Canada axes the carbon tax – The Globe and Mail

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Open this photo in gallery:

Poilievre holds a press conference regarding his “Axe the Tax” message from the roof a parking garage in St. John’s on Oct.27, 2023.Paul Daly/The Canadian Press

Kevin Yin is a contributing columnist for The Globe and Mail and an economics doctoral student at the University of California, Berkeley.

The carbon tax is the single most effective climate policy that Canada has. But the tax is also an important industrial strategy, one that bets correctly on the growing need for greener energy globally and the fact that upstart Canadian companies must rise to meet these needs.

That is why it is such a shame our leaders are sacrificing it for political gains.

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The fact that carbon taxes address a key market failure in the energy industry – polluters are not incentivized to consider the broader societal costs of their pollution – is so well understood by economists that an undergraduate could explain its merits. Experts agree on the effectiveness of the policy for reducing emissions almost as much as they agree on climate change itself.

It is not just that pollution is bad for us. That a patchwork of policies supporting clean industries is proliferating across the United States, China and the European Union means that Canada needs its own hospitable ecosystem for clean-energy companies to set up shop and eventually compete abroad. The earlier we nurture such industries, the more benefits our energy and adjacent sectors can reap down the line.

But with high fixed costs of entry and non-negligible technological hurdles, domestic clean energy is still at a significant disadvantage relative to fossil fuels.

A nuclear energy company considering a reactor project in Canada, for example, must contend with the fact that the upfront investments are enormous, and they may not pay off for years, while incumbent oil and gas firms benefit from low fixed costs, faster economies of scale and established technology.

The carbon tax cannot address these problems on its own, but it does help level the playing field by encouraging demand and capital to flow toward where we need it most. Comparable policies like green subsidies are also useful, but second-best; they weaken the government’s balance sheet and in certain cases can even make emissions worse.

Unfortunately, these arguments hold little sway for Pierre Poilievre’s Conservatives, who called for a vote of no-confidence on the dubious basis that the carbon tax is driving the cost-of-living crisis. Nor is it of much consequence to provincial leaders, who have fought the federal government hard on implementing the tax.

Not only is this attack a misleading characterization of the tax’s impact, it is also a deeply political gambit. Most expected the vote to fail. Yet by centering the next election on the carbon tax debate, Mr. Poilievre is hedging against the possibility of a new Liberal candidate, one who lacks the Trudeau baggage but still holds the line on the tax.

With the reality of inflation, a housing crisis and a general atmosphere of Trudeau-exhaustion, Mr. Poilievre has plenty of ammunition for an election campaign that does not leave our climate and our clean industries at risk. The temptation to do what is popular is ever-present in politics. Leadership is knowing when not to.

Nor are the Liberals innocent on this front. The Trudeau government deserves credit for pushing the tax through in the first place, and for structuring it as revenue-neutral. But the government’s attempt to woo Atlantic voters with the heating oil exemption has eroded its credibility and opened a vulnerable flank for Conservative attacks.

Thus, Canadian businesses are faced with the possibility of a Conservative government which has promised to eliminate the tax altogether. This kind of uncertainty is a treacherous environment for nascent companies and existing companies on the precipice of investing billions of dollars in clean tech and processes, under the expectation that demand for their fossil fuel counterparts are being kept at bay.

The tax alone is not enough; the government and opposition need to show the private sector that it can be consistent about this new policy regime long enough for these green investments to pay off. Otherwise, innovation in these much-needed technologies will remain stagnant in Canada, and markets for clean energy will be dominated by our more forward-thinking competitors.

A carbon tax is not a panacea for our climate woes, but it is central to any attempt to protect a rapidly warming planet and to develop the right businesses for that future. We can only hope that the next generation of Canadian leaders will have a little more vision.

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