You are preparing for 2013. Every year rolling out new expectations is challenging. You are hiring new reps. Subsequently, this leads to smaller territories. Yet, quotas are increasing. You can already hear your team complaining as you deliver the news.
You can’t lose your top performers. What if they make a hasty decision and go to greener pastures? Will you have any chance of hitting the number in 2013?
Why is there so much stress around quotas each year? Fear of the unknown. Reps are concerned they aren’t going to get a fair shake. You need a consistent process that adds clarity. Also, you have to start the process early. The end of the year is always hectic. You will be focused on making the number. Don’t allow annual quota planning to disrupt your team and impact the number. Take the guessing game out of quotas.
‘A’ players will leave if they don’t think the process is fair. This perception is typically a result of using only a top-down approach. What is a top down approach? It is dividing up the total sale target between reps. It is also known as peanut butter spreading quotas. Typically sales leaders also add 5-10% to the number as cushion. This is the easy way out. Sales leaders have no idea if each rep’s quota is attainable.
Instead – Incorporate Bottoms Up
Determine potential by segmenting your customers and prospects. Determine potential by territory. Align quotas to potential. You still consider the top down needs. The total of all quotas should still get you to the total number. Using this method will allow leaders to have intelligent conversation surrounding quotas. Matching quotas to territory potential will maximize your best territories. It will also give reps in low potential territories a fighting chance.
You don’t want to lose “A” players. How do you communicate quota and territory changes? We will discuss four keys to rolling out higher quotas and smaller territories.
- Use five criteria and not gut feel
- Give ‘A’ players the best territories
- Remove obstacles
- Have a system to recalibrate annually
How do you deliver the message?
1. Incorporate 5 critieria
- Organizational Goals – quotas have to align to the sales strategy
- Historical Performance – you may find someone has three times the average potential in their territory. You can’t ask them to triple performance over last year. Be realistic based on past performance
- Territory Potential – quotas must be aligned to the potential in the territory. Being able to show the data is a key component of quota setting
- Sales Cycle – quotas should align to sales cycle length. More transactional sales may require a monthly quota. Strategic sales roles may only sell one deal a year. Quotas should be annual
- Sales Talent – don’t give a newbie your most strategic territory. Align the strengths of your people to the territory requirements
2. Give ‘A’ players more potential
- Give you’re ‘A’ players more potential. They have a best chance of maximizing them. You have to hit the number. A players should have the best territories
3. Remove obstacles
- Get them a win by reducing non-selling time. Show them how shrinking their territory will reduce travel time by X. You are providing them with more hours in the day by reducing the geographic area they cover.
4. Have a system to recalibrate annually
- Ensure Process consistency
- Speed – quotas can be calculated in Oct or Nov instead of Jan
- Circumstances change quickly
- Organizational Goals – your sales strategy will change each year
- Change in potential – companies move, go out of business, grow, etc.
- Talent leaves or new hires progress
- Captured potential – as you grow, less potential is available
- Gaming the quota system – reps may figure out ways to game the system
Here is an example of a quota tool that allows for real time changes. You can add territories or shift geographies and it will adjust potential and quotas. This tool enables speed in the quota planning process. It also provides confidence and consistency to your team.
Adding heads is inevitable in a growing organization. Quotas are always an area of frustration for sales reps. The process causes stress for sales leaders. Reps leave when they don’t perceive quotas to be fair. Don’t let this happen. Adopt a methodology to ensure territory potential and quotas are calculated consistently.