We all went through the quota assignment dilemmas as sales reps or as sales executives. Quota assignment is a major tool to spur the sales force to reach the numbers and improve their performance. The compensation plans for the sales reps is dependent on how they stand towards reaching their quotas.
Often does management tend to over-assign quotas to the sales people. As salespeople are rarely in the position to argue about the quota assigned to them, they often respond with whispers and mumbles. Flurries of text messages are sent filled with fear and anger.
Although over-assigning is intuitive (why not ask for more if you can?), high quotas cause problems, they can create ill will among sales people; they can cause sales people to engage in unethical and other undesirable behaviors to make their quotas, sparking over-aggressiveness, manipulating sales milestones and all types of Sales shortcuts.
We all know of these shortcuts and how damaging it can be. Every corporate department is impacted, from marketing to distribution. Salespeople press for exceptions on everything from pricing, packaging, promotions, shipping, and payment terms. These shortcuts have real costs associated with them, both in hard cash, and in time spent determining whether and how to cope with.
When It Comes to Sales Quota Attainment, Whose Performance is Measured?
Remember, the cause for not attaining a quota may be under-performance of the salesperson, but it can also mean that the quota was wrongly set. In the latter case, it indicates poor sales leadership quality. Unattainable quotas are a sign that the company and sales leaders misunderstand their market, their value proposition and their selling model.
6 Steps for Determining The Right Quota’s
In order not to fall into the trap of over-assigning quota’s, we need to systematically follow these basic steps:
• Historical products trends: the amount of each product / service sold in total on one hand and on each of the various territories ?
• Past Year’s Revenue: What was the revenue from products / services and territories?
• Industry Standards: How much did other competitors (in the same industry) sell?
• Territory Analysis: Ratio betweennew and existing clients per territory? What are the current pipeline and latest successes?
• Product Life Cycle: Mainly in hi-tech verticals, life cycle of products impacts the yearly revenues and should thus be considered.
• Growth Expectation: adding a growth % on top of the historical results and make sure it is both realistic and challenging
Not to forget, while designing your Quota assignment
• Have in mind the company’s revenue goals and the business plan
• It is recommended that salespeople will be shown exactly how their quotas are derived. They are much more likely to accept quotas that are related to market potential when they can see the used assumptions
• A simple, clear and easy to understand quota and compensation system is required to ensure sales person focus on the right goals
• Define the event(s) for which quota is paid (order, collection, recognition..), in the context of determining how the quota attainment commission is going to be paid
• Don’t punish over-performers by pushing their quota out of reach; this can demotivate them and cause churn