Setting sales targets: result targets indicate, activity targets steer
Why a revenue target alone leads nobody, how to calculate backwards from the annual target to the week, which activities you may count and which only measure busyness — and what the Federal Labour Court decided in 2024 and 2025 about setting targets in good time.
The short answer
A revenue target steers nobody. It describes a state you would like and leaves open what someone should do on Monday morning. The only steerable things are the ones the salesperson can decide himself: how many decision-makers he speaks to, how many first meetings he holds, how many offers he submits. Result targets therefore belong in the annual review, activity targets in the week — and in between belongs a calculation that connects the two. I have seen enough sales organisations where the annual target hung on the wall and nobody could say how many phone calls that meant for the individual.
Why the result target alone does not lead
Three reasons. First, the result is delayed: in business that needs explaining, whoever calls today closes in four to twelve weeks. Anyone who only measures results notices in February that November was empty — too late to change anything. Second, the result cannot be attributed to one person: price, competition, the economy and the product are all in the mix. Third, it is motivationally blunt. A salesperson sitting at 40 per cent of target in September knows he will not catch up this year. From then on the number no longer steers, it demotivates.
Activity targets have the opposite problem when taken in isolation: they can be fully met without anything being sold. Either one alone is useless. Together they make a steering instrument.
Calculating backwards: from the annual target to the day
The link between the two is a simple chain of assumptions. The following calculation is a model calculation with freely chosen figures — it shows the method, not values anyone should adopt:
| Level | Measure | Value per month | Source |
|---|---|---|---|
| Result | New revenue | €20,000 | annual target €240,000 ÷ 12 |
| Result | Closes | 10 | at €2,000 annual value per contract |
| Intermediate result | qualified first meetings | 30 | assumption: 1 close out of 3 |
| Intermediate result | decision-makers reached | 150 | assumption: 1 appointment out of 5 |
| Activity | dial attempts | 600 | assumption: 4 attempts per decision-maker reached |
| Activity | dial attempts per working day | approx. 30 | at 20 working days |
The value of this table does not lie in the numbers but in the four assumptions between them. They are the actual object of leadership: improve the reachability rate from four dial attempts to three and you save 150 calls a month. Turn one close out of four first meetings into one out of three and you need ten more first meetings — or a better conversation. As soon as these rates come from your own data instead of assumptions, the model turns into a plan.
What you may count — and what only measures busyness
Every metric gets optimised, including the wrong one. So the rule is: count what has a person on the other end.
- Countable: decision-makers reached, qualified first meetings, offers submitted, follow-up appointments agreed with a date.
- Not countable: “contacts”, dial attempts without a conversation outcome, emails sent, CRM entries, visits without anyone to talk to. These quantities can be produced in an hour without anything having happened.
Two rules go with that. First: the definition has to be in writing. “Qualified first meeting” means, for example: spoke to the decision-maker, need named, next step agreed with a date — not: had a nice chat. Second: at most three activity metrics. Every fourth one dilutes the rest.
The third level that is usually missing
Between activity and result lies a level that is rarely managed: the state of the pipeline. Three measures are enough — the number of open offers, their total value and the age of the oldest. They show problems two months before the revenue figure does. A sales team with full activity and a static pipeline has a conversation problem; one with an empty pipeline and a good close rate has a volume problem. From the revenue figure alone the two cannot be told apart.
In good time and negotiated: what employment law requires
Where targets hang on variable pay, they are no longer purely a leadership matter. On 19 February 2025 (10 AZR 57/24) the Federal Labour Court held that an employer who culpably breaches his duty to set targets for a target period in good time generally owes damages in lieu of performance if a belated target can no longer fulfil its motivating and incentivising function. Decided in the year that follows, targets are therefore not merely worthless, they can get expensive.
If the contract provides for a target agreement, unilateral target-setting does not suffice in any case: under the Federal Labour Court ruling of 3 July 2024 (10 AZR 171/23) an employer generally only fulfils this duty if he negotiates and allows the employee influence over the determination; a clause that circumvents this is invalid under § 307 (1) BGB. And where a works council exists, the remuneration principles — that is, the system by which variable pay is determined — are subject to co-determination under § 87 (1) no. 10 BetrVG; the amount in the individual case is not.
The target conversation: three sentences that hold
“Which rate do we take as the basis — yours from the last six months or the team's?”
This makes the calculation joint rather than imposed. Anyone who uses his own rate can hardly dispute the result.
“The result target is in the contract, we talk about the activities monthly. Agreed?”
Separates the levels cleanly: the result is the agreement, the activity is the working tool.
“If the number does not hold after eight weeks: what do we change first — volume or conversation?”
Anticipates the correction while it can still be discussed objectively.
Action list
- Pull your own rates for the last six months out of the CRM — reachability, appointment from conversation, close from appointment. Without these three numbers every target calculation is guesswork.
- Calculate the annual target backwards down to the working day and show the salesperson the result, instead of just naming the annual figure.
- Set at most three activity metrics and define each one in writing, including what does not count.
- Add pipeline measures (number, value, age of the oldest offer) as an early-warning level.
- Set targets for the period before it begins — for annual targets that means December, not the spring. If the contract says “target agreement”: schedule a meeting, negotiate, minute the outcome.
- Review the assumptions quarterly, not the targets. If the close rate falls, the activity figure is not miscalculated — the conversation has got worse.
- Where a works council exists, agree the system before introduction, not afterwards.