As the year draws to a close, sales operations teams are a hive of activity, setting the right quotas and designing the optimum comp plans for next year.
Did you know that setting the right quotas is indeed one of the toughest tasks that sales operations has to deal with? So says the Alexander Group’s annual Sales Compensation Trends Survey in the years 2007 through to 2010.
For those of you who have done it, you know quota setting is a two-month long, back-breaking exercise, which will inevitably be called “unfair” and “unrealistic” by members of your sales team. While it may never be a bed of roses, here are a few top tips to set quotas that are fair, realistic and can skyrocket sales.
1. Make quota setting data-driven
A majority of companies go with a “last year plus growth” approach, but when you have so much rich data around you why not put it to good use? You could use backward-looking data like historical quota attainment data, forward-looking data like CRM opportunities data, and internal and external data such as market data and penetration data so that your quota calculations are truly reflective of the market place. Marrying all these different streams of data may seem like an ominous task, but fortunately there are applications today that recommend quotas with just a few mouse clicks.
So why should you use all this data? What is the end result? Using data ensures that Sally the sales rep who had a stellar last year is not shortchanged, with her quota doubled and her territory halved because you now calculate quotas not just based on past performance but also based on the real opportunities in her pipeline. Scientifically calculated quotas will not only be more fair to your reps but will also help push up revenues.
2. Collaborate with sales
In the vast majority of companies we see sales operations and/or sales leadership calculate targets and impose it on their sales reps. Reps don’t understand how their quotas were calculated and have concerns about whether it is fair and achievable. But there is no avenue for input, let alone buy-in. When reps find their quota unobtainable and unfair they tend to get demotivated, disengaged and are tempted to leave your company. This sort of top-down approach also allows for biases, permitting managers to hand out the best territories to their top performers. To make the system fairer, consider involving sales in the quota-setting process. When is the last time you discussed quotas with reps? What do they think of their targets? Are they realistic? Are they obtainable?
3. Consider the bottom-up quota setting methodology
There are predominantly two methodologies as far as quota setting is concerned. First is the top-down methodology, where the leadership decides on quotas and passes them down the chain of command. This works well when there are lots of leads and limited knowledge of the leads, like in the case of inside sales reps. Bottom-up methodology is the second type of methodology, wherein sales managers engage with individual sales reps to figure out what their quotas should be. This is then rolled up for further negotiations and approvals up the chain of command, all the way up to the head of sales. This is one of the best ways to collaborate with sales, giving them an opportunity to inject some realism into the system.
Using bottom-up quota setting, companies can tap into the intimate knowledge that only sales reps possess of their individual accounts. For instance, Sally, who is given a 20 percent increase in quota, may argue for less, because the big $1.2 million deal in her pipeline has been stuck ever since the CIO, the key decision maker in the account, left the company, derailing the buying process and setting her back by several months. The other great advantage of this methodology is that sales reps have a hand in their own quotas and therefore have a moral obligation to meet it.
Thirsty for more quota setting tips? Check out CallidusCloud and Selling Power’s joint webinar on 7 Simple Quota Practices to Skyrocket Sales.