February 02, 2016
by Mark Donnolo, Managing Partner, SalesGlobe
Quota problems are consistently near the top of the list of sales compensation challenges for most companies. A team can painstakingly work through each step of the sales compensation design process and create a great plan that can be wrecked by poor quota setting. Given the choice, I’d rather have a good sales compensation design and a good quota-setting process than a phenomenal plan and a bad quota setting process. If I see somebody getting significantly underpaid or significantly overpaid, it’s almost always because of poor quota setting, not the structure of the plan.
While quota setting is often thought of as a quantitative, numbers-driven discipline, most challenges are not related to the numbers but instead are related to process, the people, and their belief in the process.
Below are five of the top mistakes I see from quota setting teams.
Instead of making the mistakes above, aim for a quota-setting process that takes market opportunity into account. Market opportunity should be a primary driver of the quota. More specifically, territory opportunity relative to other similar territories can give you a good indication of what portion of the total goal should be allocated to each territory. Balance that with sales capacity. Depending on how talented your sales team is (and how many people you have), you may be able to accomplish more in any given territory than with a new or less skilled team.
One quota-setting approach does not fit all situations. While a more analytically-driven, standardized quota may work well for small accounts with a transactional sales process, a more bottom-up market opportunity approach might be better suited for a mid-sized account segment. Near the top of the account pyramid, national account quotas may be more accurately based on the information and strategies developed in an account plan. That account plan might provide input for quotas and also serve as a planning and coaching tool for sales managers to use with their account managers. Apply an appropriate approach for each type of segment or market.