The good news: You’re almost finished with your quota setting for 2015! The not so good news: It’s still one of the most arduous tasks in the sales organization, and likely there’s still angst about 2015 accuracy. Also, to-date attainment distributions have probably created more questions around goal setting. With such little time left in the year, what can you do to build confidence in the quota assignments? Here are five items to consider:
Over-Allocation Check: In our experience, over allocation of quota tends to drive skewed distributions. On average, over allocations of 5 to 10 percent are typical and center practice for most clients. Issues such as planned rep turnover; industry vertical growth rates; and expected market distortions, such as client bankruptcies, GDP and other macro market drivers will determine the correct over allocations. This is an easy last minute check. Part of this check is to understand the accuracy of last year’s allocation. What was it based on and how did it work? An eleventh-hour sanity check is worth it. The big picture outlook may have changed, and this percentage can drive a lot of sales compensation dollars next year.
Process Check: You probably have a process for quotas outlining the “who, what and when” for setting, allocating and communicating the new quotas. Some of our clients have a sophisticated year-round process; others manage the process episodically. Whatever the case, there is always room for improvement, even in the eleventh hour. Now is the time, before you roll out the new quotas, to ensure that you’ve managed all of the steps correctly. Adding a process audit or a process check-in meeting is a good idea. This last minute opportunity may be the best time before year-end. Also, if you have not taken the time to properly document your process and guidelines, now may be the best time to do it while the experience is still fresh in your mind.
End of Year or 4Q Results: Don’t wait until the end of the year for the final numbers. Make assumptions if you can, and determine probable Q4 and year-end performance. Too often, we observe clients waiting until all the year-end results are complete before assigning quotas. This, by definition, will have you behind in the release of quota for next year. Moreover, these last minute reconciliations most of the time don’t change the big picture and materially impact next year’s potential and performance goals. This may seem like a challenge if you have several big deals in the Q4 pipeline. But don’t underestimate the value of handing your sales reps their quotas at the start of the new year. Which leads me to my next point …
Don’t Be Late!: One of the most disruptive actions in a sales organization in the beginning of the year is releasing quotas late. Some of our clients even conduct their annual sales meeting with the objective, “Let’s get the sales force motivated”—before giving quota assignments. The sales reps are thinking, “Where’s the alignment if I don’t know my number yet?” Moreover, think of the messages that late quota delivery sends to the sales force. You are disorganized. Maybe you don’t really understand the market potential or have clear objectives yet for next year. Whatever the case may be, it’s not good, and it’s not motivating.
“Pre-Communicate” Quota Direction: Sales leaders not only ought to set fair individual quotas, but they also need to build confidence in the sales rep’s ability to achieve target. You can “pre-communicate” messages about the direction quotas are heading (e.g., up 10 to 15 percent from last year), and at the same time, communicate the key rationale for these changes (new product releases, new marketing campaigns, increased pricing, etc.). With sales people, (and most employees, for that matter) the less of a shock and surprise, the better. We worked with one client, who was behind with their goal-setting process, to help them “pre-present” the quota direction to their reps. When and where it was feasible, and before the final numbers were released, the first-line managers presented carefully scripted messaging about the direction of the quotas for the coming year, along with the rationale, tying the message to the business growth objectives and strategy. Reasonable ranges were shared (e.g., $1.3M – $1. 6M), along with guidance for account targets, hunting goals, farming goals, margin, new product pushes, and so on. The first-line manager had more of a “how can we climb this hill” conversation and also facilitated a level of comfort and confidence along with an expected range. This helped give the reps some needed direction and motivated them about charging into the coming year … all without assigning the exact quotas. This could be especially helpful if roles, territories and/or sales compensation plan designs will change substantially.
Quota setting does not need to be bureaucratic or complex. We advocate for the use of simple but comprehensive methodologies. And if necessary, late in the year, these last minute checks can provide increased accuracy and supply the sales force with added confidence.
To learn more about building effective quotas, please visit the Alexander Group’s Sales Quotas practice.