The State of Sales Force Turnover and 3 Moves to Make Right Now

By Clinton Gott and Ted Briggs, BSC Co-Founding Principals

If attempting to read the tea leaves on sales force turnover trends, one will find a muddled picture. On one hand, recent government statistics indicate jobless claims are near their lowest levels since 1973, with the overall unemployment rate around 5%. We recently ran our 2015 Sales Force Retention Survey, co-sponsored by OpenSymmetry and Xactly. Sixty-eight leading companies participated, and 70% reported turnover rates below 15%, which is generally below historical levels. To reinforce these mixed messages, only half of respondents expected turnover rates to increase in the next 12 months, while half did not. So does sales force turnover really matter right now?

Impacts of Turnover

One clear picture did come out of our study – the implications of sales force turnover are significant. 75% agreed with the statement “sales force retention is a high concern to my organization,” while 72% stated that sales force turnover is “detrimental to our business.” To quantify the costs of turnover, a number of studies estimate the direct costs and reduced new hire performance equate to the departing salesperson’s Target Total Compensation level, if not greater.

There is a clear connection between sales force turnover and significant business disruption. Looking at our survey again, the following choices received answers of “somewhat significant,” “significant” or “very significant”:

  1. Reduced productivity due to new hire ramp-up time – 88%
  2. Poor results from open territories – 79%
  3. Decreased sales force morale – 69%
  4. Exiting salespeople poaching colleagues – 47%
  5. Exiting salespeople poaching customers – 47%.

How long do territories underperform? Our study found the median time required to “hire a qualified candidate” was a somewhat brisk 1-3 months, and the median time required for a “new hire to become fully productive” was 4-6 months. That implies a territory could be sub-optimally producing for up to 9 months. In complex sales environments, we found full productivity constrained for 18 to 24 months.

So whether turnover is at or below typical levels, and whether a wave of turnover is beginning to crest or not, prudent organizations are taking steps now to address this topic. So what can be done?

Turnover Counter Move 1 – “They are Called Best Practices for a Reason”

Sales compensation of course plays a role in combating turnover, and you should start by ensuring your plans align well to best practices. Compensation is often cited as a primary driver of turnover, and that’s enhanced when an organization’s plans don’t measure up. BSC has a list and worksheet of “Fifty Better Sales Compensation Practices” that we encourage companies measure themselves against, and we can highlight some of the most pertinent concepts here.

Risk and Reward

The role’s base/incentive pay mix should match the role’s sales prominence and impact on results. Gone (or almost gone) are the days of 100% absolute commission plans; the vast majority of sellers have a base pay component. But the base to variable ratio needs the right balance, with some stability on the downside and a meaningful target incentive amount to magnify on the upside. Pay mixes usually range from 50/50 to 80/20, and you’ll want to make sure your pay mix fits each unique sales role.

Upside Opportunity

Turnover concerns should logically focus most on your top performers, the ones who exceed goal. And those best reps want to be well-rewarded for beating expectations which is delivered through upside opportunity, typically with appropriate acceleration rates above goal. In most direct sales positions, we want to see the highest performing reps doubling or tripling target incentive. In our retention study, 24% of companies indicated they do not use any accelerators, which should be an immediate red flag to anyone reading this! For those who do offer acceleration, it may be time to double-check your rates and consider offering greater upside.

Plan Simplicity

Sales compensation plans should not require advanced mathematical degrees to understand or calculate. For example, if we find a plan document with seven measures and eight different kinks in the pay line, we’ll likely label that plan as too complex and your reps will label that plan “incomprehensible”. Such plans will not motivate as one hopes or expects, and the compensation dollars may be poorly spent. The best plans usually have no more than three measures, and the mechanics should be simple and sensible. While each case should be uniquely considered, there are rarely meaningful benefits to a plethora of payout rates and an over-engineered pay line above and below goal. Don’t overthink it. Consider a threshold if it makes sense, and identify an enticing and cost-effective acceleration rate. Focus on your most important strategic imperatives, keep the plans simple, and clearly focus the reps to best maximize results.

Fair Expectations

Salespeople are more than just a cost center or a line item on a financial spreadsheet. They can be masters of their own universe and the key driver of company results. Be fair. Set realistic goals and be leery of excessive quota over-allocation. We jokingly ask sometimes, “What’s the best way to drive productivity?” Answer: “Just increase quota!” [Please insert a “ba da bump!” drumroll here]. Ah, if it was only that simple. Perhaps a better question for that “increase quota” answer would be, “What’s the best way to increase sales force turnover rates?” It’s important to set fair goals, instill hope, and avoid sales reps checking out before the year even starts. If there is internal pressure to over-allocate quota, findings from a recent BSC Quota Study suggest only doing so between the frontline managers and the individual reps, and no more than 5-10%. We want at least 50-60% of reps achieving goal in healthy sales culture, and massive quota hedge can strongly counter that ideal.

Again, there are many best practices to consider, but if a role’s sales compensation plan does not align to the ones that fit your business, or you don’t know how you compare, this should clearly be your first strategy for not only countering turnover but supporting a healthy and high-achieving sales organization.

Turnover Counter Move 2 – “Sweeten the Pot”

In some cases such as highly competitive labor markets or highly sought after sales roles like sales engineers, the core plan may need a little juicing up. In our retention study, 70% of respondents used short-term incentives and 40% used proactive and/or reactive retention bonuses. Retention bonuses can be particularly impactful for key roles or high performers, and are most effective when paid out over time to retain talent for as long as possible. We recommend establishing internal policies for when you may be willing to use these tools, perhaps not in all cases, for all roles, or for all salespeople. But hey, this costs money! Correct. But if an occasional $10K pop keeps a high performer on board and avoids the six-figure cost implications of losing him or her, then the case practically makes itself. As they say, “Penny wise and pound foolish”.

Turnover Counter Move 3 – “There is More to Life than Money”

Money matters. Sales compensation matters. But we increasingly find salespeople are expecting a little (or a lot) more. Additional common tactics used by survey respondents included job promotions (57%) and noncash recognition/perks (48%). Here too, proactively establishing programs or guidelines can be the right approach.

We believe these tactics have particular appeal to Millennials, who this year surpassed Generation X to become the largest share of the American workforce. Studies find Millennials more highly value training and development, flexibility in work hours and time off, mentoring relationships with company leaders, and fostering a greater sense of purpose. There are many creative ways to address these needs, with the goal to improve the employee value proposition and increase a salesperson’s sense of belonging and personal validation.

“The Best Time to Plan for a Catastrophe is Before It Happens”

While few if any of the things we do in our work lives are truly catastrophic, there are definitely challenges to deal with and issues to avoid. Sales force turnover is one of those; it’s wise to ensure your organization takes steps to minimize your risks and exposure.

Our client work suggests sales force concerns are actually increasing, with intimidating consequences to customer relationships, sales force morale and overall business results. The best solution requires a multipronged attack. Start with sales compensation best practices, consider additional investments and address increasing salesperson expectations for non-compensation dimensions. The goal is to increase the connection between the salesperson and the organization through enhancing the employee value proposition. The stakes are clearly high, and the organizations that take steps today will win the retention and sales battles of tomorrow.

About the Authors

Clinton Gott and Ted Briggs are the Co-Founding Principals of Better Sales Comp Consultants. BSC is a management consultant firm dedicated to creating better sales compensation programs and better sales effectiveness solutions. BSC team members average over 19 years of experience and use a senior-driven, flexible, and collaborative consulting model. They believe in solutions that leverage cross industry best practices from high-tech, consumer products, financial services, medical products, logistics, and other industries.

Should Sales Managers Be On Commission Plans?

By Clinton Gott

We recently had a client interested in changing individual salesperson plans from quota-based to a commission structure. The company is in somewhat of an “old school” industry where commission plans are sometimes found, even in mature organizations. After much discussion, the company simply felt a commission design was the right near-term choice to create renewed sales force energy, and the design questions soon moved on to the sales managers. They asked the question whether sales managers should be on the same type of commission plan or should remain on goal-based plans.

Our advice was to use goal-based plans for a number of key reasons:

  • Managers should be focused on delivering a total expected number rather than thinking about what share (commission %) they “get” from each dollar of sales – commission plans, when used, are best left for those involved specifically at the deal level.
  • Manager goals should serve as the building blocks to the total goal for the organization – almost all companies have total goals that need to be delivered to investors.
  • The leaders accountable for the total goal should push the hardest to have their direct reports on the hook for delivering a specific goal – this increases accountability and helps ensure overall results are achieved.

Some of the company’s leaders had a misconception that pure quota plans are “growth-oriented plans” when in reality, goal-based plans include growth expectations and then offer the opportunity for incredibly attractive acceleration once a goal is beaten. The flat rate commission plan being advocated lacked any tie to goals and had no bar to meet to reach accelerated levels of upside. If anything, pure commission plans reward for any growth or just absolute dollars, which may or may not actually match up to definitions of good performance or align to the growth results a manager needs to deliver to ensure the organization achieves in total.

Goal-based manager plans often feature high thresholds and strong accelerators, which ensure the appropriate downside and upside expectations. With the right design decisions, the company was able to create exciting manager plans that drove performance, ensured cost effectiveness, and increased the company’s overall chances for success. If you have questions or want feedback, please email me at gott@bettersalescomp.com.

How Many Accounts Should Our Salespeople Cover?

By Clinton Gott, Principal

Companies often pose this question, implying that there is a magic answer or all-encompassing industry benchmark that can accurately evaluate whether their salespeople should cover more, fewer, or the same number of accounts. The studies that do exist can provide directional information, but unfortunately, they do not provide much of a meaningful answer for the unique products, coverage opportunities, and coverage needs of a particular sales organization, not to mention the many sales roles that often exist within a sales force. Fortunately, the answer can be generated by following a logical process approach with informed assumptions along the way. The key is combining the coverage needs of your accounts with the available coverage realities of your sales force.

Account Coverage Demands. Not all accounts are created equally, in terms of the time and attention required to optimally sell to them. You should first segment your accounts along logical parameters, such as account size, vertical market, and sales strategy (retention, penetration, or acquisition). The cataloging exercise can be informed with data (current revenue, degree of penetration, total account potential) along with expertise from your sales organization, typically the sales leaders on down to the frontline managers. What’s the intensity of the sales effort required? Does that vary by accounts with some being more high, medium, or low touch? How much time must a sales representative spend on a typical account in an average week, month, or year? How does the time required vary again by those high, medium, or low touch designations? These questions can and should be part of your account planning exercise.

While the answers may not be perfectly clear or defensible, this exercise addresses the right types of questions and re-frames the way companies cover accounts and assign representatives. The question moves from “how much revenue should a salesperson deliver” to “how much can a salesperson deliver, based on the realities of the time required to cover one’s accounts”. The ultimate goal is to ensure each account is given the most optimal amount of coverage that drives the most meaningful results, while ensuring we can supply this coverage in the most cost-effective way possible. For example, if a field salesperson can only cover four particular “high touch” accounts, and the revenue or future sales that result are insufficient to fund that salesperson or the margins the company requires, then those accounts may be better served or supplemented by lower-cost resources. The answer to the right number of accounts begins with an understanding of how much time and attention accounts from various segments require, thus providing the demand side of the coverage equation.

Salesperson Coverage Supply. We next need to understand how much sales time one of our sales representatives has to cover accounts. This is where some of the highest variances may exist from one company to another – the amount of quality sales time available. In some organizations, non-sales time such as administrative tasks, managing internal politics or battles, or simply excessive “windshield time” can minimize the amount of time a salesperson has to provide the coverage hours identified for the targeted accounts. A salesperson with 70-75% of time available to sell (usually considered an industry best practice) compared to one with only 30% of time to sell (a very low percentage indicative of challenging internal demands, poor role design, or poor deployment model) face very different coverage realities and opportunities. Studying, or even just considering, the amount of time your sellers have to actually sell can be an extremely valuable exercise, and the answer represents the supply side of the mathematical framework that addresses the number of accounts a salesperson can cover.


Matching Supply and Demand. With estimates now of the time required to cover accounts along with the available time to do so, you can do the simple mathematical exercise that takes a first pass at how many accounts a salesperson can cover. See the example below:

Estimated time required to cover various accounts:
o   Large Tier – 750 hours per year
o   Medium Tier – 250 hours per year
o   Small Tier – 30 hours per year

Available sales time for a Sales Rep: 75% selling time x 2,000 hours available (representative annual assumption) = 1,500 hours

Potential coverage examples:
o   2 Large accounts (2 times 750 hours = 1,500 hours)
o   6 Medium accounts (6 times 250 hours = 1,500 hours)
o   50 Small accounts (50 times 30 hours = 1,500 hours)

While this is a simplified example, this type of analysis frames the coverage conversation in a more useful light, i.e., the workload required to best cover accounts and drive results. End of day, these estimates may surely need refinement or some iteration, and your sales force deployment decisions should not treat this information as infallible. But this exercise can provide an excellent starting point and a realistic view on how to think about account coverage, and of key importance, help guide the all-important conversations to generate the right answers.

Recent Client Example. One recent client that asked this question was in a business-to-business financial services industry. Their account assignment characteristics varied highly and did not include much rigor around what a salesperson can truly accomplish. In the top tier, they had delineated very clear concepts focusing salespeople on approximately one to four accounts. These numbers derived though from the sum of the current revenue generated by the accounts, i.e., “a large account salesperson needs to deliver X amount of revenue”. This failed to address what revenue could result with the right amount of focus rather than bundling the number of accounts to generate some level of expected revenue. The coverage approach for the medium-sized accounts was even more extreme, with salespeople owning anywhere from 10 to 100 accounts, also assembled to ensure the revenue sum is “enough” to warrant that salesperson’s existence. They felt the the current model lacked the necessary level of refinement, and they asked for guidance to think through the analysis and alternatives.

For the for sales representatives with up to 100 assigned accounts, careful interviewing and CRM analysis identified that they really only focused on 20 or so accounts, and workload analysis indeed confirmed only enough time to adequately cover that number. That meant on average about 80 medium-sized accounts were sitting relatively idle. Yet this same organization had an aggressive, talented, and hungry inside sales team only covering pools of the very smallest accounts. Why not shift a portion of those untouched medium-sized accounts into the inside sales team’s patch, thus making them the crown jewels of that organization? In this case, the company decided that was the right way to re-energize their sales results. Through understanding the required and available workload, the company created the logical business case to break with current convention, rethink the coverage and assignment strategy, and ensure they provided the right amount of time and attention to all of their highest-potential accounts.

Some organizations run studies and claim to offer comparable benchmarks for the right number of accounts to cover, but in reality, this may not be particularly useful or actionable information. Sales models are surprisingly unique and the data will rarely offer an apples-to-apples comparison for any particular company. Account coverage should be more of an internally-focused planning exercise that requires both quantitative data and qualitative sales management expertise to be completed. The foundation should be built on an analysis of the workload supply and demand equations. This effort will not only provide more accurate immediate answers, but it can result in a more enlightened ongoing approach for working through your optimal coverage strategies.

With the proper number of accounts assigned, you can ensure that appropriate productivity expectations, aka “goals” or “quotas”, can be assigned. That can then lead to optimal sales compensation plan designs and outcomes, the kind of plans that direct, motivate, and reward top performance.

Defining Your Sales Compensation Annual Roadmap

By Clinton Gott (click here to request a white paper version)

As with most years, this year is probably flying by faster than one could possibly imagine. High workloads and competing interests can lead to sales compensation and sales effectiveness solutions failing to get the attention they need and deserve. One critical element to achieving success emerges through following a reasoned and strategic plan for how to tackle this year’s sales coverage and sales compensation needs. Without this plan, the year may whiz by in a blur with little real change and a lot of unfulfilled opportunity. Our clients frequently ask us how they should prioritize some of the most important activities across a new year, so we will use this article to share our observations on best and practical practices that we’ve seen across hundreds of organizations.

First Quarter – Finalize Plans, Communicate, and Start Administration

In many cases, the first quarter includes an urgent need to finalize sales compensation plans and quotas for the new year. Finishing the plan designs and getting formal approval should be job number one if those tasks are lingering from the prior year. With plans completed though, the traditional first quarter focus follows:

  1. Communicate Plan Details Within the First Two Weeks. Such information primarily includes any changes to plan measures and mechanics, if not all plan-related details like the actual quotas. If possible, an in-person kickoff meeting is best. We recommend sharing the “what” (plan details), the “why” (why the plans are changing – the strategic intention), and “how” (what process the company followed to decide on the changes). You can also add another “how” – clearly answering the question: how can salespeople be successful and make good money on the new plan? Telling them directly is a wise strategy.
  2. Communicate Goals by the Start of Month Two. When it comes to goals, we find most companies are not ready to share goals within the first two weeks, which would obviously be ideal in terms of aligning to plan rollout. But under this scenario, we support revealing the plan details at the start of month one, with an expectation that the goals themselves will follow as soon as possible. That approach should work for both commission plans and goal-based plans, although it can cause a snag with Individual Commission Rate (ICR) plans where the commission percentage is calculated based on the goals. Even for those though, the plan framework, e.g., measures, crediting approach, etc., can be shared earlier. We’d rather not hold the plan design details hostage to the final quota decisions, and we also would rather not rush out inaccurate quotas too early just to get them out! So separating the plan details and quota communication events is often an effective solution.
  3. Make Final Updates to Your Administrative Processes and Systems. If not already completed, you have to finish these changes quickly in Q1 before you can process initial payouts. If for some reason the process is not set for payments that should occur, you can use a draw approach until ready, but that clearly is not a preferred practice.

Special notes – for those involved with international plans in countries with Works Councils, you’ll of course need your plans done with enough time for the negotiations and finalization. Meanwhile, for those in California, new laws require commission plans to be clearly documented and signed off by employee and employer. That has caused some to interpret that new plans need to be finalized, communicated, and confirmed by January 1, although most of our clients have not been aligned to that interpretation. Whatever the case, clear plan documentation is an essential part of the new laws.

Second Quarter – Ongoing Plan Review and Early Stage Strategic Thinking

With the plan year in full swing, the second quarter focus should break into two primary focus areas:

  1. Perform Ongoing Plan Review and Maintenance. Plan issues usually escalate in the second quarter, and the compensation team should be vigilant to address concerns and ensure the plans are working as intended. One hopes no plan tweaks or changes are needed, but you’ll want to start capturing feedback coming from the field. Best-in-class organizations will often formalize this feedback by creating an online field survey about the new plan, reviewing the rollout approach, gauging their degree of understanding, and collecting any initial perceptions on the plan’s ability to motivate and drive performance.
  2. Consider Upcoming Deployment or Role Change Needs. In many cases, the effort to change sales roles and coverage can take months to identify, plan for, and implement. To ensure success, we recommend companies start trying to identify these topics even as early as the Second Quarter. By way of example, we had a recent client looking to merge three discrete sales teams (all selling to the same accounts) into an integrated model featuring an account manager/owner with sales specialist support. We spent the last month of Q2 doing focus groups to test the concepts, validate the opportunity, and identify potential pitfalls. Without this step occurring this early, they would not have been able to tackle the significant cultural and logistical change management challenges in time for a go-live in first month of the next year. Planning and successfully implementing significant changes typically requires this kind of runway.

Third Quarter – Plan Assessment Steps

In the Third Quarter and throughout the plan year, topics such as plan administration, review, and maintenance should be ongoing activities. But in terms of unique steps, Q3 is the pivotal quarter to start your formal sales compensation assessment steps, which include:

  1. Perform Interviews. This step should include talking with corporate stakeholders, sales managers, and field personnel to understand upcoming strategies, market opportunities, evolving role definitions, and sales compensation plan performance and needs. The intensity of the interviewing phase should vary based on company needs, but it is essential to collect feedback from various levels. The field survey from Q2 can support these efforts, or you could consider running it now in Q3 if not pursued in Q2.
  2. Begin Reviewing Pay and Performance Data. To supplement the interviews, you should examine the pay-for-performance correlations, quota achievement distributions, and overall payout ranges and upside, among other targeted analytics. This analysis should be by role and can consider multiple data cuts based on quota size, tenure, and other descriptors. While you can start this work on Q3, you will likely want to update it in Q4 when more of the plan year has been completed.
  3. Collect Market Pay Data and Perform Market Pricing. This again is an appropriate annual or bi-annual practice, which can require more or less intensity based on your particular needs. Market data can provide useful and “directionally correct” information on market trends and serves as the “science” part in the “art and science” of determining appropriate pay levels. The “art” portion of course is your actual experience recruiting and retaining the appropriate sales talent.
  4. Begin to Craft the Plan Assessment Story. Whether you actually hold a formal assessment meeting at this time or simply collect the data related to it, you’ll want to have made good progress assessing the plans by the end of Q3. The assessment story should include a review of current plan performance as well as gaps or issues that may need to be address for next year’s plan.

In addition, companies that are looking to make role or coverage changes should continue performing the relevant analytics and draft first cuts at what roles people will fill and which accounts will be assigned to each person. Ideally, some notion of workload planning should be incorporated into how accounts are assigned and how many an individual salesperson can optimally support.

Fourth Quarter – Plan Design, Plan Communication Preparation, and Final Strategic Decisions

This is where both the sales compensation design activities and any strategic implementation activities really heat up. In terms of the incentive designs, you should be sure to:

  1. Hold the Formal Assessment and Design Meetings. We recommend pulling together relevant stakeholders from sales, finance, HR, and systems to review the performance of the current plan designs, identify needs for the upcoming designs, work through options, and finalize decisions on what the new plans should be. In our consulting work, we find the design teams usually include eight to twelve people and require three to four meetings, depending on the magnitude of the potential changes and the efficiency of your design and decision making process.
  2. Perform Cost Modeling and Connect to Budgeting Process. New plan designs should be tested for cost appropriateness using a scenario-based approach. These findings can sometimes lead to tweaks in the plan recommendations and in some environments, the cost modeling connects to the budgeting process as an organization considers costs based on headcount, productivity expectations, and the final plan design decisions. Compensation Cost of Sales (CCOS) is most impacted by target pay levels, headcount and productivity expectations, but the plan design details such as threshold usage and acceleration can have some degree of impact, although usually a secondary one.
  3. Finalize Deployment Model, Role Changes, and Coverage Decisions. The outcomes of these decisions can impact all the elements of sales compensation – pay mix, measures, pay line details, crediting, etc. It is essential to share this information as early as possible with the compensation design team to create effective plans efficiently.
  4. Focus on Quota Setting. Quota setting needs to occur both at the macro-level and at the micro-level (territory/salesperson/account). Deployment and coverage decisions can greatly impact the micro-level quotas and headcount decisions have a bearing on the macro-level one as well. None of these decisions exist in a vacuum so tight alignment is required across the strategic decisions, plan design work, and quota-setting process. The final quotas may be locked in after the year completes, but your organization should make good progress on early drafts by the end off Q4.

As plans start to finalize, your organization should plan for and begin working on the communication steps. These normally include:

  1. Craft a Rollout Plan with Assigned Ownership. We normally like to see a senior leader do the initial plan rollout presentation but the sales managers should be accountable to hold one-on-one sessions with direct reports. To enable the managers to be effective, organizations should hold train-the-trainer calls or meetings. The best plan rollouts follow a cascade approach with senior level visioning and messaging, combined with sales manager one-on-one sessions with the salespeople. In one of our clients, they took the sales manager’s communication role so seriously that in Q2, they surveyed the direct reports to discover whether the sales manager held the one-one-one sessions, how effective they found the explanation, and then the degree of plan understanding that resulted. The findings were tied to the manager’s performance review and coaching was instituted to improve future effectiveness.
  2. Create Rollout Presentation. This will be delivered by the senior leaders as well as elements by the frontline sales managers. The materials need to be thoughtful and well-structured to truly help sell the plans to the sales force.
  3. Prepare Plan Documents and Update Terms and Conditions. Again, this would seem like an obvious step but many companies do a poor job formally providing such materials. The Plan Document should be role-specific and include plan specifics and payout examples, while we normally recommend a single consolidated Terms and Conditions document for ease of review and update.
  4. Provide Excel-based Plan Calculators. These tools can be a very effective way to ensure early and deep understanding of new plans. The calculators are programmed by the corporate staff, ensuring accuracy and that the field reps do not spend time programming their own usually inaccurate calculators. This extra step can go a long way to quick understanding and more effective plan impact.

See, that’s it! Simple as that! Okay, maybe it is not all that simple. Helping create improved sales effectiveness and appropriate sales compensation plans certainly takes high effort and a diligent process. While this roadmap does not include every step or nuance, it includes many of the main and biggest categories of work for which to plan. The timing can shift forward or back, but if you stay on these approximate timelines, you should have an effective year and not one marked by late fire drills and a nagging sense that “we could have done better”. Good luck in your efforts to always create better sales compensation plans and better sales effectiveness solutions!

It’s Quota Setting Time – Beware of Irrational Exuberance!

By Per Torgersen

In our line of work we get to spend a lot of time with salespeople.  We hear the good, the not so good and everything in between.  One of the topics that always seems to fall in the “not so good” column is quotas.  There is never a shortage of strong opinions, but generally, the themes are a sense of unfairness, lack of achievability, and no transparency of the process.

We always like to dig deeper into these issues as in many cases the quotas directly impact the reps’ pay.  In our discussions, many of the salespeople volunteer detailed spreadsheets they have kept regarding their productivity in past years, major wins, number of accounts growing and declining, new products introduced each year – you name it!  The good ones really know their metrics and are not afraid to put forth their arguments against irrational numbers.

Common stories we hear include:

  • Revenue growth has been steady at 3-4% per year the past few years, but suddenly a rep receives a quota for the next year representing 15% or more growth, with no new products being launched, no new customer segments being targeted, and no explanation provided.
  • A “bluebird” sale landed in a particular year, with the expectation for the next year anticipating another one, thus slapping a percentage growth objective on an already likely inflated number.
  • Misalignments between field reps’ quotas and that of management/the company, with the end result that the majority of reps don’t make their quotas but the company hits its overall targets as do many of those in management (leading to the morale killing situation where management and leaders head on incentive trips with the vast majority of salespeople left behind!)

To that last point, in a recent Quota Practices Studies (performed by BSC and the WorldatWork), we found only half of the participants over-allocated quotas and usually no more than 5-10% levels. The over-allocation was generally held to just front line manager to sales rep but not at higher levels in the sales organization.  If you want the Executive Summary, e-mail us at info@bettersalescomp.com.

The implications of these situations are quite predictable:

  • Diminished morale, and salespeople just giving up because they have no confidence they can hit their number.
  • Swings in performance, with reps gaming the system, and looking at their incentive pay over a two year cycle, with a great year followed by a lousy year, which then gives them a lower quota the next year and a good payout again.
  • Diminished incentive payouts, leading to a higher number of salespeople keeping their eyes open for other opportunities and increased turnover and open territories for the organization.
  • Resentment and distrust of management and leadership, again potentially leading to turnover and business disruption.

When we talk to management and leadership about what we hear from the sales force, we often don’t get the best answers – “Wall Street is expecting 15%”, “We think we may have the new product out by the end of the year but it’s been delayed a few times”, or “We always have to grow by a double digit percentage, but you are right, the last few years the actual growth has been around 1-2%”.  We tend to believe the long term pains of over exuberant quota setting far outweigh any short term or perceived gains.  In fact, we’ve had two recent clients who over-allocated quotas by 15-20%. The results were both organizations consistently had only 30% of reps hitting goal while the organizations themselves still managed to meet overall objectives. Morale sank, turnover increased, and no amount of quota over-allocation could keep the organizations’ future results on track! The perceived overall near-term success could not be maintained, and each had to rebuild the sales organization and resulting growth engine.

So when you set or get that number for 2015, use some common sense, and ask the “why” and the