Today’s post is by Lisa Gschwandtner, editorial director at Selling Power. Find her on Twitter at @SellingPower20.
What’s your process for setting quota? Do you allow your salespeople to provide input?
According to a report published by AON Hewitt Associates, only seven percent of companies set quotas based on rep input. And 45 percent of companies use no internal, bottom-up data at all to set and allocate quotas.
As a manager, you might be wondering, “Why would I involve my reps in this process? I just want them to hit the number I give them!” The reality is that getting reps to achieve quota isn’t as simple as handing off a target and sitting back to watch the revenue roll in. According to CSO Insights, only 48 percent of sales organizations achieved quota in 2014, and those numbers are not on an upward trend.
In a recent live webinar, How to Use 7 Simple Quota Practices to Skyrocket Sales, Selling Power publisher Gerhard Gschwandtner and CallidusCloud product marketing manager Poornima Mohandas discussed a number of issues sales leaders need to be aware of when it comes to setting quota. Here are three potential hazards they outlined for organizations that fail to take rep input into account when establishing target goals.
- Salespeople become unmotivated. Sales reps want to know that their quotas are set using fair standards. They also want their quotas to be attainable. If you were asked to pursue a goal you felt was absolutely impossible, you’d probably have trouble mentally committing to the task. Salespeople are no different.
- Your risk of turnover goes up. Not only do unmotivated salespeople feel less desire to perform, they also start looking for other opportunities. As Gschwandtner pointed out, the average rate of turnover in the U.S. is about 30 percent. In some industries, that average number is much higher. If you can avoid turnover simply by changing your approach to setting quota, it’s worth your time to explore those options so that reps don’t explore theirs.
- Top performers get overburdened. Top performers love a challenge. But they may already be working at peak performance. Just because they hit a very high number one year does not mean they’ll be able to beat that number the following year. Everyone has good years and lean years, and all salespeople are vulnerable to external changes they cannot control (for example, territory realignments or market shifts). Do you want to frustrate your top performers by creating unreasonable expectations?
If you’re thinking that getting input from reps would be too burdensome in terms of time and process, then you’re overlooking one key factor: data.
According to both Gschwandtner and Mohandas, data is currently the defining factor of success when it comes to setting (and helping reps achieve) quota. Gartner Group has actually estimated that, on average, enterprises will miss the equivalent of 10 percent of total sales in lost revenue that could have been captured with improved processes for defining, assigning, and managing territories, quotas, and compensation plans. Without data, territory mapping and quota calculations become subjective, favor certain sales reps, and often do not maximize the company's overall revenue potential.
As an example, here are the types of data Mohandas recommended tapping into.
Internal data: Use at least three years’ worth of historical data about each rep’s performance to inform your quota targets.
External data: This could include market data, penetration data, and data that reflects seasonal trends (this could be especially relevant for certain industries such as retail or insurance).
Forward-looking data: This data resides in your CRM system in the form of recorded pipeline opportunities.
Marrying all this data into a single stream can seem formidable. But there are applications available to allow sales managers to consume, digest, process, and leverage data to recommend quotas and optimize territories. In the final analysis, this can help you create highly motivated, loyal reps who feel empowered to meet or exceed their number.
For many more tips and insight about data and setting quotas, listen to the full recording of the webinar: How to Use 7 Simple Quota Practices to Skyrocket Sales.