Sales quotas align field sales force and corporate strategy, linking sales performance and pay. Quotas also promote dialogue between managers and sellers and improve sales result accountability. Finally, quotas will also differentiate between high and low performers, allowing the organization to take appropriate action for an individual contributor’s performance.
How can the sales organization ensure they set quotas correctly, especially during the launch of new products and services?
These are just a few tactics that will make it difficult to set the right quotas and motivate and get buy-in from sellers. Poor quota setting results in increased rep turnover and low morale. In addition, the organization can also experience increased cost of sales and productivity losses. However, with proper quota setting, companies can experience improved territory penetration while maximizing sales growth while establishing an appropriate risk and return environment.
One suggested desired distribution for new products and services targets:
Statistically complex models typically result in marginally better quotas vs. sound management judgment.
This approach incorporates current sales opportunities and history, increasing seller buy-in while achieving business plan expectations.
Identify gaps between “top-down” numbers and “bottom-up” forecasts to meet business objectives.
Managers should ensure reps understand quotas to ameliorate sales performance deterioration, avoid the increased cost of sales, and clearly communicate achievable targets.
Reps must understand quota process logic to accept achievable, effective, fair, and equitable targets.
Audit quotas regularly for improvement and identify ways sales management can positively impact the process.
Timely assessment is critical. Changing sales dynamics and early communication are vital to setting and implementing effective quotas.
Be sure to avoid the DON’Ts of quota setting:
Historical percentages can cause high performers to earn low incentive pay if they have already maximized the opportunity in their territory. In addition, historical sales are only appropriate when products and markets have maintained a consistent, slow-growth trend.
The pay process must drive individuals to achieve their sales quotas. Focusing on small changes can disincentivize reps.
The sales organization should use performance monitoring and behavior modification throughout the year to ensure that the company achieves desired results. Managers should review quota effectiveness, changing dynamics, and market information throughout the year and make appropriate adjustments.
Alexander Group understands your revenue growth challenges. Since 1985, we’ve served more than 3,000 companies across the globe. This experience gives us not only a highly sophisticated set of best practices to grow revenue—we also have a rich repository of unique industry data that informs all our recommendations. Aligning product, marketing, operations and finance efforts behind a successful sales organization takes insight and hard work. We help the world’s leading organizations build the right revenue vision, transform their organizations and deliver results.