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:
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.
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.
Advanced analytics will reveal root cause issues in two primary areas:
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.
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.
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.
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.