March 15, 2017
by Mark Donnolo, Managing Partner, SalesGlobe
Years ago, I sat in a smoke-filled room with the head of sales for (ironically) a health insurance company. In between drags on his cigarette, he described how his top sales reps were all leaving the company – not for better incentive plans or a more promising career path, but because of quotas.
“We knock it out of the park and what kind of reward do we get? A bigger quota next year,” he said. It was true. The company had an outdated quota-setting process: they took last year’s performance and added 10 percent, without taking into consideration the market’s appetite for its services or the reps’ capacity.
Most quota problems are not about the number, necessarily. They’re about the process: how executives arrive at the overall revenue goal and how that number is allocated down through the sales organization.
From the results of a recent survey of sales leaders conducted by SalesGlobe, below are the six biggest quota-setting challenges companies face today.
These challenges all pose risks to a sales organization, including de-motivation of the sales organization, missed growth targets for the business, lower impact of the sales compensation plan, and high sales organization turnover. If not corrected, top performers may lose faith in the organization and seek another role in another company where they can have both the satisfaction and job recognition that come with exceeding their quota – and the financial benefits of being a top performer.
While there are several good quota setting methodologies – and no one-size-fits-all solution – considering the market-based opportunities is always a good place to start. Market opportunity-driven quotas are developed by starting with historic information and building on it based on the characteristics of the market. Market opportunity might consider predictors of potential that indicate how much opportunity might reside in an account. For example, the number of employees at an account location may be correlated to revenue potential. Those indicators can become part of a larger predictive model that either estimates the potential of a territory or compares that territory with other territories to help allocate the goal correctly across those territories.
This approach can be effective for a large number of accounts. And, if your high performers can have success and make money for themselves and the company, chances are better that they’ll stay.