The growth number for next year is set. Now comes the task of determining how to break that number down to the sales rep level. Welcome to the quota allocation challenge.
Quotas are rapidly gaining importance in healthcare companies. Recent Alexander Group healthcare industry research revealed that over 90% of healthcare companies have either quota-based or quota-influenced compensation plans. Far different from several years ago when quota-less straight commission programs ruled the day, companies now face the annual task of taking the corporate growth number and determining how to allocate next year’s goal to individual sellers–in a thoughtful, practical, and equitable way. Here’s four important pointers for driving a quota allocation process that can help you avoid singing the quota allocation blues…
- Use Opportunity Data. Getting your arms around the opportunity at a territory or account level can be tough, but companies are pushing harder and harder to find such data and figure out how to use it as an input to quotas. How penetrated is a territory? What is our share? Which doctors are high-volume users? Which hospitals are most likely to use your products based on characteristics such as size (e.g., number of beds, number of procedures), specialty areas or performance orientation, to name a few? Leveraging such data as one of the weighted inputs to your quota model is important for injecting the reality of opportunity into individual quotas.
- Treat small quotas differently. Many growing healthcare companies with rapid hiring goals have a number of quite small territories that introduce risk and volatility to the quota model. These territories may have high growth potential but the timing and predictability of growth may be unstable while such resources as hospitals and physicians field test the product. Using a higher commission rate for these territories is one solution to avoid the trap of setting an arbitrary quota. This takes pressure off leadership to precisely set an individual quota when they have a reasonable understanding of the aggregate quota responsibility for the small-quota segment.
- Harness field knowledge and input. Management participation in the quota allocation process is critical to ensure the inclusion of ground-level knowledge. Information that is not transparent to corporate leadership can have important influence on the reality of an individual quota–on the high or low side. Factors such as competitor lockout, new facility openings, reimbursement landscape, consolidation, customer product concerns, legacy reputation and many others can and should have some influence on individual quotas. Give sales management the ability to adjust modeled quotas (within defined ranges) during the quota allocation process for next year, and then run an iterative process to ensure the numbers all add up to the overall goal.
- Incorporate some cushion. Quota allocation is an imperfect science by its very nature. You are doing your best to predict the future. Don’t let a futile pursuit of precision drive you to insanity in allocating quotas. Do what many companies do. Provide some cushion by adding 5-10% overall to the top-down target to account for unexpected issues, open territories, talent changes and other factors. This level of “overassignment” typically balances a reasonable cushion without overly inflating quotas to unreasonable levels.
Using the above pointers can help ensure your quota allocation process results in best-estimate goals for the sales force. If you’d like to learn more about how AGI can support your quota allocation process, please contact us to speak with one of our practice leaders today.
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