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So what makes good quota-setting so challenging? We see 10 issues that make a difference when setting quotas. Knowing the causes and leveraging these success factors could help you set clear quotas for your organization.
1. See Beyond a Single Number. When executives design a good sales compensation plan, the team steps back and admires the final product. To the design team, it’s not a comp plan, it’s a sales compensation program.
Several weeks ago I wrote about the Sales Compensation Diamond, a best practice sales compensation design process, and the first part of the process: Framing the Plan. This week I want to look at the second step: Linking Pay & Performance.
Once you have set Target Pay, Pay Mix, Upside Potential and Performance Thresholds (the framework of the plan), it’s time to link those pay mechanism to action.
How much cash should a top sales person potentially earn in a given year? More than her manager? More than the head of sales? More than the CEO?
Last week I discussed the Sales Compensation Diamond, a best practice sales compensation design process, and the first part of the process: Framing the Plan. This week and next I want to look at an important step within Framing the Plan: Upside Potential.
What happens when the sales leadership team takes a hard look at its sales compensation plan? Do they talk with their calculators? Is a spreadsheet the primary conversation piece? Think about what happens at meetings about sales strategy or sales roles and the question of sales compensation comes up. People start talking about whether the commission rate should be increased or decreased. Comments like, “Let’s put an accelerator in place to drive performance. Maybe we need to uncap the plan, or add a threshold for the low performers,” fly through the room.
When describing sales roles and personalities, we prefer the canine model to the more common hunter/farmer metaphor because it’s more descriptive and brings the cast of characters to life. It’s possible that a farmer could become a hunter, but most breeds of dog simply cannot move from one species to another.
Defining sales roles has a direct connection to the sales compensation plan.
When companies grow from year to year, they don’t grow in a straight line. They hold onto some revenue from current customers, they lose some revenue and customers, and they grow in other areas. Analyzing the ebb and flow of revenue and profit can help a company understand how it grows, plan for future growth, align sales roles, and motivate the right results in those roles.
Organizations change, as do sales strategies. (But not people. People don’t change. More on that later.)
As sales strategies are modified, sales roles either evolve or fail. One CEO with whom we recently worked pays close attention to the sales roles supporting his sales strategy --year after year.