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Insights

Don’t Let Quota-Setting Mistakes Wreck Sales Team Engagement

Wednesday, May 30, 2018
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Every year, SalesGlobe conducts a survey of the top sales compensation challenges companies face. And every year—consistently—quota setting is the number one problem.

You could argue that quotas aren’t even part of the compensation plan. In fact, we set quotas after the plan is complete. But quotas are really the linchpin between the compensation plan and performance. You could have a very effective compensation plan, but if you don’t have effective quotas, it can derail the entire plan.

Below are three common mistakes to avoid:

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Don’t Have Your Quotas Ready

According to our data, about 30 percent of companies did not have their quotas ready by month one. In fact, quotas actually may not be ready in the first quarter of the year. A lot of times, this is because the numbers aren’t available from finance until the end of the year and the quota setting process can’t begin until those numbers are ready. This also leads to a rush-job of quota setting.

Adjust Quotas Mid-Year

Because too often we rush through quota setting, and for a variety of other reasons, about half of companies will adjust quotas during the year. Sometimes there are valid reasons to adjust quotas: if there’s a major change in the market or your production capabilities, for example. Some companies, however, adjust quotas mid-year to manage pay. In our opinion, this is usually not a great idea. When making quota adjustments it’s very important to have policies set ahead of time for why you would make those changes.

Base Quotas on Historic Performance Only

When quotas aren’t set correctly they don’t reflect actual market opportunity. Instead, they tend to be historic—just add a certain percent to last year’s quota. A better method combines a bottom-up perspective from the frontline, assessing real market potential, with a top-down perspective on what needs to be sold in order to achieve the company’s revenue goals.

Effective quota setting is critical for the sales team’s success. Ultimately, the implications of an ongoing quota process that’s not working well can be misalignment of goals to markets and misalignment of opportunities and also eventually missing goals year after year. No wonder this is a challenge area year after year.

For more insights, check out Essential Account Planning: 5 Keys for Helping Your Sales Team Drive Revenue. And be sure to join me in New Orleans, November 6-7, for the ATD SELL Conference.

About the Author

Mark Donnolo is managing partner of SalesGlobe and author of The Innovative Sale: Unleash Your Creativity for Better Customer Solutions and Extraordinary Results and What Your CEO Needs to Know About Sales Compensation. He focuses on helping companies grow profitably by developing and implementing strategies that improve the effectiveness of their customer-facing sales, marketing, and service organizations. His areas of focus include sales strategy, customer segmentation, channel strategy, sales organization design and deployment, performance management, and incentive compensation. Mark’s work spans several industries, including technology, telecommunications, business services, manufacturing, and financial services.

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