There are two words in a sales rep’s language lexicon that can inspire dread and excitement in equal measure, depending on the reason for them being mentioned. That’s “sales quotas”. Often the reason for loving your job, sometimes the reason for leaving it, wouldn’t it be great if there was a real method and thought process to how they are set?
Quick reminder: Textbook definition of sales quota
Without wanting to state the blindingly obvious, a sales quota is a target set by a manager, director, or entire executive board. It can be set for an individual, on other occasions across a team. This is usually part of annual or quarterly objectives and KPIs, and success or failure will determine a sales rep’s commission or bonus. It may also be a major part of a performance review. For someone working in sales, every working day bears the imprint of what that sales quota means. It’s a satisfying number of calls, emails, meetings, and deals. It’s also the sting of rejection when a voicemail goes unanswered or a proposal that goes no further.
A recent survey revealing that the stress of unattainable sales quotas is the second most popular reason for voluntarily leaving a sales role (the first was a lack of confidence in the product portfolio, in case you were wondering), how can we be better at setting realistic sales quotas?
1. Separate Strategy from Tactics
You’d be surprised how many people conflate these terms, and by doing so, the outcomes can be dire. A strategy is that company-wide thinking and direction that guides pretty much everything. Whether that’s a commitment to eliminating all plastic packaging, taking a business entirely online, or going hard into new territory (let’s say marketing ruby chocolate to Australia for the purposes of this analogy), it tends to be the big picture stuff. While individuals and teams down the line need to work towards a strategy, this overwhelming sense of purpose probably doesn’t relate much to their own piece of the business jigsaw puzzle.
Tactics, on the other hand, are the actions undertaken by a person or team to hit a specific part of that bigger strategy. So rather than giving a person a sales quota that includes approaching every possible prospect from Sydney to Perth by Friday of this week, a tactic would be to make a set number of calls to specifically identified candy distributors in one Australian state or city across a month. And just for good measure, a selling point that aligns with strategy is that every bar comes in a biodegradable wrapper.
2. More Carrot, Less Stick
Some managers build a career out of fear-mongering. They may not make many friends, and their personal “tactic” of threatening job loss or a reduced compensation payment is purely about getting their team to work harder and longer. In the case of sales quotas that are setting impossible targets or using nasty methods to shame those that may be struggling with success. That’s not a wise approach and rather than more or often than not can have a catastrophic effect on morale and motivation. There are also those managers that are constantly moving the “cheese” just out of reach. This means that even for high performers who can manage and achieve their original quota, it’s often an impossible feat.
By changing the sales quota model to one of motivation and realistic incentives, team members can give their best without walking out on the job and feel appreciated. By backing up your sales quota with a robust compensation scheme, the end game is always in sight and attainable. Commission and bonuses are not the only way to motivate; extra holiday days and gifts can also be the metaphoric emerald city on the yellow brick road to sales quota success.
3. Avoid Looking Back
A further common ‘fault’ when putting together sales quotas is by including too much reference to historical data and deals. This is generally the forecasting model. The analysis of past data can be useful but needs to be contextual and relevant. Back in the world of ruby chocolate making an impact, if last year it had record sales in Sweden, does this have any bearing on Australia? Giving a sales rep the northern territory where are three times the amount of sheep than people and where the scorching weather makes any chocolate a recipe for melting failure shows a lack of forethought and sets them up for sales quota failure. Another example would be if there had been a bumper crop of ruby cocoa beans from 2016-19, followed by a famine. If this break in the basic supply chain is overlooked, it makes a nonsense of any plan.
4. Get Onboard with Sales Software
Smart thinking and resetting your business model are one route to being better with sales quotas. To really make this fly, and to give your team confidence that there’s data to back up your ideas, give serious consideration to a sales software suite. A quota management package makes planning much easier and adds a level of transparency that everyone involved will appreciate. Implementing this means the whole team has visibility of maps, figures, and other customizable fields such as competitor activity or market opportunity. Used in the right way, no team or person should feel that they are carrying too heavy a load, or that they aren’t being given enough leads to work with.
Want to find out more about how you can change the way your business approaches sales quotas? Speak to your Varicent rep today or visit www.varicent.com