For companies with the fiscal year identical to the calendar year, we are entering the period where sales leadership starts thinking about the next year. One of the key parameters to figure out are the sales quotas to be given to the salespeople.
As the percentage of salespeople reaching or overachieving quota can be considered an established measure of Sales Effectiveness and it is also common knowledge, that the percentage of salespeople reaching quota leaves a lot of room for improvement, it might be a good time to discuss the above question.
The Sales Leadership View
There is little doubt for sales leadership that quota attainment measures the performance of the salesperson. Setting a sales quota (goal) possibly with some stretch built in, to motivate the salespeople to give their best, is considered good management practice.
As salespeople rarely will be in a position to argue about the quota given to them, this is probably the view that prevails within most companies.
The External Observer View
From a third party point of view, the cause for not attaining the quota, may be caused by inadequate efforts from the salesperson, but it can also be due to a wrong setting of the quota. In this latter case, sales quota attainment would then measure sales leadership performance.
Testing Your Quota Setting Practice
As a sales leader, you might consider the following questions helping you to assess your quota setting practice.
When figuring out the quota for the individual sales person, do you:
- Consider the potential number of ideal customers in the person's territory?
- Apply measured conversion rates (e.g. prospects converted to leads, to opportunity, to proposals to close) to determine the percentage of customers who are likely to buy?
- Take into consideration how long the salesperson is already assigned to the territory?
- Consider the mix of existing and new customers in the territory?
- Factor in the average deal size to determine the monetary amount of the quota?
The more questions you answered with 'no', the more your quota setting risks to be biased. Quotas might then be perceived as unattainable even with best efforts by your salespeople. This might negatively affect their motivation and morale just at the time when these are needed to persist in a tougher environment. I am not advocating here that quotas should not have a certain challenge for the salesperson, but it should stay with in reasonable limits.
If you care to have a motivated sales team, but had to answer 'no' to several questions, you might then ask yourself what is currently hindering you to adhere to the few simple principles suggested with the questions. If you think the hurdles you find are insurmountable, then I suggest you might want to stop expecting better sales effectiveness of your team measured in quota attainment.