Mission Possible: Setting Good Sales Quotas
By Mehmet Bozbay, ZS Associates
While quotas can be a powerful instrument to motivate and reward salespeople, they can cause significant problems for organizations if not set correctly. Improperly set quotas can lead to extreme outliers on both ends of the performance spectrum, as well as exceeding allocated budgets, top performers missing their quotas and a demotivated salesforce with high turnover. Considering those possibilities, it should not be surprising that good quota setting is the top issue for sales incentive planners, according to the 2012 “Annual Incentive Practices Research” study, conducted by the author’s company.Even though it is challenging to set good quotas, companies should not think it is impossible. Companies can and do set quotas for their salespeople that:
Addressing the Pitfalls of Quota Setting
So why do companies struggle to set fair quotas? Part of the answer is related to the amount of time dedicated to the quota-setting process. In the experience of the author’s company, companies usually spend 90% of the planning period on plan design, and 10% on their quota-setting approach. This tends to result in incentive compensation professionals not considering important factors and leads to misallocation of the national forecast. Also, the challenge in most organizations is most of these “professionals” are really not subject-matter experts. Individuals are in sales operations or marketing, and may not have the necessary breadth of knowledge for key tasks.
Quotas can be an incredible motivator and can provide clear direction to the salesforce, but if set improperly, they can have the opposite effect. To set fair quotas, it is critical that companies validate the national forecast, account for potential, set appropriate caps and floors, and incorporate input from the field. Such an approach will make quota setting not only possible, but achievable.
About the Author
Mehmet Bozbay is a manager at ZS Associates in Evanston, Ill. He can be reached at email@example.com.
Read the September 2012 edition of Sales Compensation Focus.
Contents © 2012 WorldatWork. No part of this article may be reproduced, excerpted or redistributed in any form without express written permission from WorldatWork.
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