Quota Setting
It is a rare sales person who will say, "my company does a great job of setting quotas." The fact is that there is no perfect quota, but there are varying degrees of dysfunction. And they are the Achilles Heel of salse compensation plan design; even the best sales compensation plan can be completely undermined by bad quotas.
There are three main elements to quota setting:
1. Setting the overall number
■ This generally comes down from the top and is influenced, but by no means controlled, by what the sales force believes is realistic
2. Implementing a sound methodology for allocating the quota to each individual in the sales force
3. Implementing a management process that will ensure timely delivery of quotas, using the best information and incorporating field review
A quota setting project generally goes like this:
■ Conduct interviews, and review relevant documents and data
– The sales force always has a lot of useful feedback on limitations of the current process
■ Define and evaluate current quota setting processes and methodologies used in organization
■ Select quota setting methodology that works best, given sales environment and data availability
– “Fair share”
– Modified “fair share”
– Account planning method
– Quantitative modeling (regression, time series, allocation based on factors)
■ Finalize details of new quota setting methodology
■ If possible, model effectiveness of new methodology using historical data to set quotas for a recent period
■ Evaluate new methodology with regard to accuracy and fairness, and make adjustments
– Did the new methodology produce quotas that would have turned out to be reasonable on the surface?
– Were they accurate?
– Were they fair? (Accurate may not mean fair!)
– Were they biased against one group or another? (e.g., particular regions, or those who were given particularly large growth goals)
■ Document data needs steps, timing, and accountability for implementation of new methodology
There are three main elements to quota setting:
1. Setting the overall number
■ This generally comes down from the top and is influenced, but by no means controlled, by what the sales force believes is realistic
2. Implementing a sound methodology for allocating the quota to each individual in the sales force
3. Implementing a management process that will ensure timely delivery of quotas, using the best information and incorporating field review
A quota setting project generally goes like this:
■ Conduct interviews, and review relevant documents and data
– The sales force always has a lot of useful feedback on limitations of the current process
■ Define and evaluate current quota setting processes and methodologies used in organization
■ Select quota setting methodology that works best, given sales environment and data availability
– “Fair share”
– Modified “fair share”
– Account planning method
– Quantitative modeling (regression, time series, allocation based on factors)
■ Finalize details of new quota setting methodology
■ If possible, model effectiveness of new methodology using historical data to set quotas for a recent period
■ Evaluate new methodology with regard to accuracy and fairness, and make adjustments
– Did the new methodology produce quotas that would have turned out to be reasonable on the surface?
– Were they accurate?
– Were they fair? (Accurate may not mean fair!)
– Were they biased against one group or another? (e.g., particular regions, or those who were given particularly large growth goals)
■ Document data needs steps, timing, and accountability for implementation of new methodology