The process of setting sales quota is a mission critical element of many sales compensation processes, those involved put in a lot of work and are very happy when its complete. Sales Incentive plans are so dependent on accurate targets that the following data and Best Practices should provide great fodder for reflection and hopefully plant the seeds for some process improvement efforts within your own company. Setting accurate sales quota is a process which is commonly identified as a leading issue that most struggle to do well.
The lightning Rod for today’s discussion is two excellent research studies published recently; one by the Aberdeen Group and another by ‘WorldatWork’ in collaboration with ‘BSC; Better Sales Comp Consultants’ related to Best Practices for Managing Sales Quota. The data is based on surveys of a large enough population that some great insights can be gleaned. Let’s take a close look at two sources of data then discuss how these support known best practices for Quota setting and management.
The 2012 Quota Practices Study focus directly on the Quota Management challenge and provides some interesting data that sheds some light on the Quota Management process. This Study includes input from over 80 brands across many industries such as High Tech, Pharmaceutical, Medical Device, Food & Beverage, manufactiuring and Financial Services.
The 2013 study by Aberdeen titled ‘Motivate, Incent, Compensate Enable; Sales Performance Management Best Practices’. Aberdeen broke up their 312 respondents into three categories (Best-In-Class, Average and Laggards) based on aggregate performance scores.
Today’s focus; How many reps are hitting Quota? How many should be hitting quota?
- 56% of companies had at least half of their sales force exceed quotas.
- 39% have at least “60% or reps above Target
- 55% desire to have at least “60% of reps above Target”
- Interesting side note; 23% of respondents say the goal is for less than 50% of reps to hit target.
Best Practice Guidance: Target 60% of reps to hit annual quota.
- 83% of all sales reps achieved annual quota in the last measured year.
- 61% of all first-year sales reps achieved annual quota in the last measured year
- 8.8% more reps achieving quota verses last year (year-over-year comparison)
- 66% of all sales reps achieved annual quota in the last measured year.
- 50% of all first-year sales reps achieved annual quota in the last measured year
- 7.2% more reps achieving quota verses last year (year-over-year comparison)
- 31% of all sales reps achieved annual quota in the last measured year.
- 25% of all first-year sales reps achieved annual quota in the last measured year
- 6.8% more reps achieving quota verses last year (year-over-year comparison)
For those using quota to drive either their target incentive commission plan (Target Variable Comp/Quota=Commission Rate or Factor) or target bonus incentive plan (bonus payouts in the form of cash or tiered commission rates based on achievement against quota), this information may help put your own porcess in some context.
As a quick aside, the tool of choice for the analytic work that goes into setting quota at the beginning of the fiscal period is overwhelmingly excel (almost 75% of companies surveyed by World@Work/BSC). There are, however, tremendous opportunities for sales organizations to leverage Sales Performance Management (SPM) tools such as NetCommissions during the quota adjustment process where the ability to quickly update and roll out plan changes and updates can define the difference between a sales organization that can turn on a dime to a market change and one that gets quickly bogged down in a time consuming, lethargic administrative process.