Calculating quotas isn’t just about setting the right numbers. It’s also about understanding your people, facilitating goals, and inspiring teamwork. Mark Donnolo, managing partner of SalesGlobe and expert in the field of sales innovation, strategy, and coaching, recently joined us to kick off the first webinar in our Playbook for sales planning series and shared his insights into the art and science of sales compensation.
Donnolo began by framing the discussion. He shared that when asked the question, “what is the biggest sales compensation challenge at your company today?” 52% of surveyed companies responded that setting effective quotas present the biggest challenge. [Click to tweet] But why does setting quotas present such a challenge for companies, where is the breakdown occuring? The answer is multi-faceted, and a mix of both art and science. For 47% of companies, quotas are driven by historical information that does not represent the current market opportunity.
This rear-view mirror approach to setting quotas can cause difficulties for companies because what happened in the past does not necessarily reflect what is going to happen in the future. The artful nature of quota setting can be seen in the way that sales quotas are determined. Donnolo shared that 38% of surveyed companies responded that a lack of process to accurately set quotas was their biggest challenge. Without an effective process it can be difficult to get sales reps to buy into their quotas, and the lack of quota-setting transparency can be demotivating.
To see if what he observed happening at large companies resonated with the webinar audience, Donnolo initiated a poll and asked the question “What quota setting methods do you use most?” The results of the poll can be seen the in the chart below.
Interestingly, the majority of the audience poll results almost directly mirrored how companies that Donnolo surveyed set their quotas. 42% of audience respondents said they use historical information to set their sales quotas, which closely aligns to the 48% of surveyed companies that also use this method to set their quotas. While many methods of quota setting can be used simultaneously, Donnolo shared that as a best practice companies should work towards setting quotas using opportunity-driven methods to help drive revenue.
Along with using opportunity-driven methods to set quotas, Donnolo shared a few other best practices that companies can employ to find the right balance when setting sales quotas.
- See beyond a single number. Setting quotas is an intricate process, and attention should be paid to how numbers are selected, not just the numbers themselves.
- Remember the people. The quota setting process should be transparent and incorporate input from the reps in the field.
- Move beyond history. Purely historical approaches often penalize sales reps. Getting stuck in legacy patterns stifles thinking and prohibits companies from capitalizing on market opportunities.
Discover what percentage of sales reps are attaining their quotas at companies today, find out how a company responded to a tricky sales quota situation, and learn eight questions to ask when confronted with a complex quota issue by watching the recorded webinar. Learn more about how other organizations navigate these challenges by downloading our sales planning survey, created in partnership with SiriusDecisions.