Goal setting continues to be a top challenge for sales executives. Planning the future can be fraught with uncertainty, but targets are essential to driving behavior. Quotas are especially important and offer these benefits:
Aligns field sales force with corporate strategy
Links performance and pay
Promotes dialogue between managers and sellers
Ensures sales result accountability
Differentiates high and low performers
We thought the sales compensation plans were to blame … that we were not providing the best incentives to our sales reps. There were bigger sales force issues driving our underperformance.
- Executive client
Getting quotas right takes effort. Unfortunately, it is common for companies to improperly set quotas that lead to less-than-desired results.
For instance, typical quota-setting problems include using a top-down approach without rep collaboration, adding a percentage to last year’s performance, starting the process late or releasing quotas too late, applying over-allocations driven by corporate expectations, and poor insight into market potential. These are common drivers for ineffective quota setting, but the results can be disastrous and lead to:
- Increased rep turnover and low morale
- Increased cost of sales (COS) and productivity losses
- Failure of costly overlay and support roles and processes
- Under penetrated territories where sales growth is not maximized
- Failure to provide an appropriate risk and return environment
Diagnosing Quota Allocation Issues
Trial and error quota-setting processes are expensive. That is why it is more efficient to have a methodology that reflects market realities, addresses core problems and includes advanced analytics. Below is a common framework for setting quotas.
Step 1
Analyze the ideal attainment distribution
Understanding industry best practices and benchmarks will assist in defining an ideal quota attainment distribution. For instance, the distribution may include 90 – 95% of salespeople reaching threshold level, 80 – 85% of salespeople performing between threshold and excellence level, 60 – 70% achieving or exceeding target or “at plan goals,” 5 – 10% of salespeople reach excellence level, and the bottom 5 – 10% enter performance improvement program.
Once deployed, Sales can ask, “What do we know, and what can we test further?” Incorporating analytics will help refine quotas and lead to better results. This analysis typically points to issues with the quota-setting process, deployment or new market data.
Step 2
Identify root causes using advanced analytics
Advanced analytics will reveal root cause issues in two primary areas:
- Territory dynamics and potential
- Deployment analytics
STEP 3
Review quota allocation methodologies
Analytics will reveal which methodologies are appropriate for quota setting. For small accounts or portfolios with many unassigned accounts (80 or more), a quantitative approach that includes statistical modeling or Modified Fair ShareSM approach can be used. A combination of quantitative and account knowledge is used for medium-sized account portfolios (with 15 – 80 assigned), and Sales can use the Fair ShareTM and Sales Opportunity Funnel. Finally, Account Planning is employed for large accounts, incorporating analytics, rep and account management input, and ongoing review.
Leadership’s Role in Diagnosing and Solving Quota Issues
Analytics will reveal where quotas are succeeding or failing. When issues are identified, it is time for leadership to act. The first step is to understand how well quotas are working to achieve desired outcomes. Know your quota-setting scorecard compared to best practices and adjust where necessary.
When results are skewed, take immediate action. Analytics will reveal where quotas are off course, leading to undesired outcomes that must be aligned with the attainment model. That is when it is time to diagnose the issue and prioritize solutions. Solutions or revisions may need to be incorporated into the forecasting, allocation, crediting or deployment processes. In addition, talent issues that include enablement or training may need to be enhanced. Finally, go-to-market or changes in market conditions will impact quotas and require immediate action.
Leaders are an inherent part of the quota development and attainment process. Combining analytics, industry best practices and expert partners will help improve quota development, helping to achieve corporate objectives and market leadership.
Getting Quotas Right
The right partner can help you can make your quota-setting process and sales compensation program more effective. Alexander Group brings a set of proven methodologies, industry expertise, and proprietary database of benchmarks and best practices to increase the likelihood you achieve your objectives and get the most of your go-to-market investments.
About Alexander Group
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.