Have Quotas Overstayed Their Welcome? May 10, 2013 Hosted by Cargill Prepared by Consulting Performance, Reward & Talent | Sales Force Effectiveness Presentation.

Have Quotas Overstayed Their Welcome?May 10, 2013

Hosted by Cargill

Prepared by ConsultingPerformance, Reward & Talent | Sales Force Effectiveness

Presentation to the Twin Cities Compensation NetworkSales Compensation Subgroup

Consulting | Performance, Reward & TalentProprietary & Confidential | 10/2012

Agenda for Today’s Discussion

Topic Time

Welcome and Introductions 7:30 – 8:30

Quota Setting Issues Best Practices 8:30 – 10:00

Break 10:00 – 10:15

Quota Management Practices Survey Results 10:15 – 11:15

Debrief & Discuss Topics for Next Session 11:15 – 11:30

Quotas are the hidden half of sales compensation plans that drive performance and expense…they can undermine even the most effective plan.

Consulting | Performance, Reward & TalentProprietary & Confidential | 10/2012 3

About Us

Aon Hewitt Associate Partner and Manager, based in Lincolnshire, IL

~17 years sales compensation and effectiveness experience

Insurance/financial services, consumer products, health care, manufacturing

Aon Hewitt Partner, based in Lincolnshire, IL

>25 years sales effectiveness experience Medical products/pharma, CPG, financial

service, general manufacturing

SteveRob

4Consulting | Global Compensation & TalentProprietary & Confidential | AA/SF/GCSOF.PPT/LS-11581 02/2012

Introductions

Name Company Current role What is the primary sales effectiveness issue currently affecting you and/or your sales

organization? What are you looking to get out of this session today?

5Consulting | Global Compensation & TalentProprietary & Confidential | AA/SF/GCSOF.PPT/LS-11581 02/2012

Opening Discussion

Why do companies use quotas for their sales forces? What issues at your company related to quota setting attract you to today’s roundtable?


Quota Setting Approaches and Best Practices

6

Companies Commonly See One or More of the Following as Potential Indicators of a Quota Setting Problem…

Quota Achievement100%

Nu

mb

er

of

Re

ps

Too-Many or Too-Few Reaching Quota

Wide or Uneven Distribution of Attainment


Nu

mb

er

of

Re

ps

Disconnect Between Best Reps and High Achievement

Bottom Reps

Top Reps

Group

105%Paul

100%Brian

Perf.Rep

115%Kim

95%Sally

90%Jane

85%Rob

Bottom Reps

Top Reps

Group

105%Paul

100%Brian

Perf.Rep

115%Kim

95%Sally

90%Jane

85%Rob

Quota Achievement Not Aligned With Business Plan


Nu

mb

er

of

Re

ps

95%Business Achievement

100%Rep Achievement

95%Business Achievement

100%Rep Achievement

7

…as well as other commonly realized issues

Sandbagging by reps (and management) Over-burdening top performers with higher quotas Talent churn in territories with low potential Loss of aggressiveness in territories with high potential Demotivation and loss of selling time due to quota negotiation and angst Negotiation of quotas favors more senior reps Loss of management focus and coaching time Failure to communicate quotas in a timely fashion Failure to communicate quota setting methodology or ownership of quotas Meaningless quotas with no impact on pay, promotion, or recognition Mid-year changes create perception of gaming Can bias other incentive opportunities (recognition, award trip, spiff, etc.)

A distraction at best, and a meaningful barrier to performance at worst!

8

Quota Setting in a Sales Performance Context

Problems with quota setting and allocation can undermine the effectiveness of other sales management programs… leading to slow growth and poor profitability

Companies are correct in questioning the validity of their quota setting, due to the critical role quotas play in motivating the sales force to reach business goals

Aon Hewitt Sales Performance Model

Organization Design

Talent Management

Performance and Rewards

Performance Management Quotas and Measurement Compensation and

Recognition

Assessments Recruiting and Selection Career Paths Training and Development Leadership and

Management Process

Selling and Service Model Job Roles and Structure Deployment Planning Enablement Through

Support Infrastructure

Align the Sales Force Realize Business Impact

Customer Insight and Segmentation

Business Strengths

Value Proposition

Competitive Dynamics

Understand Business Drivers

Creating a sales structure that is effective in meeting customer needs in an efficient manner…

Ensuring the availability of the right talent for the right role at the right time…

Maximizing the productivity of an engaged sales force to exceed business goals…

9

10

Customer Acquisition

Cross-Selling

Up-selling New Prods Expansion

Customer Churn

Beginning of Year

Revenue

End of Year

Revenue

2012

2013

- +

+ +

=

Retention New Sales Base Business Net Growth

Price Increases+

Customer Scale-Back-

Factors That Need to Be Reflected in the Quota

Performance, Reward, & Talent | Sales Force EffectivenessProprietary & Confidential | Motorola – Sales Compensation Workshop 041713

To maximize effectiveness, sales processes, roles, management processes and key enablers should be properly aligned and connected with these elements of growth.

Sales incentive plans work with quotas to reinforce strategy and drive growth

Effective sales compensation plans translate the key business objectives and sales strategy into a design that drives behavior to execute. In creating this alignment, there are 10 critical elements:

1. Business Objectives, Sales Strategy, & Roles1. Business Objectives, Sales Strategy, & Roles

2.Eligibility

2.Eligibility

3.Target Pay Levels

3.Target Pay Levels

6.Measures/Weights

6.Measures/Weights

5. Upside Opportunity

5. Upside Opportunity

8.Quotas/Crediting

8.Quotas/Crediting

9.Payout Timing

9.Payout Timing

4.Pay Mix

4.Pay Mix

7.Mechanics

7.Mechanics

10.Administration

10.Administration

Competitive Aligned Effective

11

Quotas tend to emerge as a tool to manage productivity and cost as companies mature

I

Start-up

II

High Growth

III

Optimization

IV

Maturity

$0 - 100 Million

30 to 50% CAGR

Characteristics:

Commissions

High Risk

Simple Territories

Solo Credit

Characteristics:

Commissions

Moderate Risk

Split Territories

Split CreditCharacteristics:

Quota/Bonus

Moderate Risk

Accounts/Territories

Multiple Credit

Characteristics:

Quota/Bonus

Lower Risk

Accounts/Segments

Team Credit

$100M - $1B

20 to 40% CAGR

$1B - $5B

10 to 20% CAGR

$5B+

-10 to 10% CAGR

12

There are 4 undeniable truths about quota setting…

1. The business needs them to be high, and sales reps want them to be low

2. Because quotas almost always affect compensation, there will be politics and complaining

3. There will be a distribution of actual performance around quotas – you will not have (and don’t want to have) all reps right at 100% of quota – so there will be “winners” and “losers”

4. Good quota setting doesn’t happen on the back of a napkin

1. The key is to identify quotas that meet the business plan and are reachable

2. Fairness across reps is the measure of success – all reps should be able to reach their quota

3. Quota allocation should be tested to ensure that a typical distribution of quota achievement results in meeting the business goal

4. A process that identifies the flow of information and accountabilities should be defined

… which lead to 4 “Golden Rules” that guide our perspective

13

Spectrum of goal setting sophistication …

Industry

Predictability

Account Planning

Company/BU

“Maturity”

Sales Management Strength

Historical

Data

Advanced IT

Systems

Data Availability

High growth,

immature industries, Bus. Units

Co’s

Mature , Data Rich

(e.g., CPG,

Pharma)

Best Practice

Evolve from left to right …Don’t try to start too far to the right!

Goals from the top of the organization

are distributed

evenly

Goals are devised through

econometric modeling and

predictive statistics

Stakeholder

Involvement

Knowledge of Customer

Well defined/disciplined sales process

Understanding

of market

potential

14

Best practice is to strive to achieve the “ideal” distribution of performance to goal

Threshold 100%

Number ofSalespeople

30-40%of Sellers

60-70%of Sellers

Excellence

Top10% of Sellers

Goal Performance

Bottom10% of Sellers

Target level equates to 100% of plan

Performance level requiring minimal effort – set based on historical performance or fixed costs

Excellence level allows 10% of sellers to earn upside earnings, it is usually set using historical data

15

• The overall business goal is divided by the number of reps

• All reps receive the same quota

• An overall growth goal is identified• The growth rate to historical sales

in the territory

• An “average quota” is established• Adjustments are made based on

territory opportunity

• Territory potential drives the quota• Adjustments are made to ensure

business goals are met

Across businesses and industries, there are essentially four approaches to allocating quotas to the sales force

Equal Allocation

“Last Year Plus”

Opportunity Adjustments

“Bottoms Up” Market Potential

Increasing Complexity, Increasing Precision

16

• The overall business goal is divided by the number of reps

• All reps receive the same quotaEqual Allocation

General Advantages General Disadvantages

Streamlined allocation process; limited data and iterations required

Easy to synchronize with the overall business plan

Easy to communicate

No link to actual territory composition, which may lead to an unequal ability to meet and exceed the quota

Can result in dramatic over/under payment not linked to seller performance

1. Territories are equal in size, or when using an “open-market” deployment strategy

2. Applied to new products/services with unknown potential

Appropriate When…

Approach

AdvantagesandDisadvantages

Applicability

17


Streamlined approach; easy to communicate

Past results can serve as a proxy for territory composition, linking the objective to potential

Easy to align with business growth goals

Assumed historical results were appropriate

Tends to be seen as punitive by top performing reps, particularly those with abnormal one-time wins

1. Applied to “annuity” businesses or products2. Relatively consistent historical results and

growth potential across territories

Appropriate When…

Approach


Applicability

• An overall growth goal is identified• The growth rate to historical sales

in the territory“Last Year Plus”

18


Reflects territory potential

Relatively easy to communicate and align with the business goal

Provides management flexibility

Adjustments tend to not fully recognize potential

Can become political if customer potential data are not understood

1. Territories vary modestly, but there is still meaningful potential in all markets

2. Sales force and management have some history with estimating customer potential

Appropriate When…

Approach


Applicability

• An “average quota” is established• Adjustments are made based on

territory opportunity

Opportunity Adjustments

19


Best reflects territory opportunity, thus most clearly identifies top performers (versus “cherry picking”)

Data-driven and defendable; less subject to discretion and politics

Requires investment in or possession of customer-level data

Often fails unless the process is managed with strong discipline

Credibility (“black box” perception)

1. Territories vary dramatically; higher volume does not necessarily mean better rep performance

2. Appropriate customer-level potential data exists

Appropriate When…

Approach


Applicability

• Formulaic potential modeling drives the quota

• Adjustments are made to reflect reality

“Bottoms Up” Market Potential

20

An important input for account planning is the total potential in an account and your share of that potential

The revenue you realized from the account this year

Your Competitors’ Account Revenue

+Opportunity

Total Potential

Revenue OpportunityTotal AccountPotential

+

+

=

=

Is it accurate?Is it reasonable?

21

Discussion #2

Rep A– $2 million in annual gross margin– 5% annual growth– 100 customers in a 500 customer

territory– Territory has $10 million in gross

margin potential (20% share)

Rep B– $1.2 million in annual gross margin– 10% annual growth– 50 customers in a 250 customer

territory– Territory has $4 million in gross

margin potential (30% share)

Which should have a higher growth goal?

22

Rollout and Monitoring

Tool Creation and Process Execution

An Approach to the Modifying Quota Process (High Level)

Understand concerns about existing quota setting process

Identify systems and data availability/ constraints

Identify potential methodologies; select preferred approach

Problem Statement and Solution Identification

Develop quota setting and allocation tool to draft field quotas

Submit to appropriate field managers for feedback, adjustment, and validation

Gain approval by business leadership

Communicate quotas and supporting concepts to the field

Monitor performance against quota (and against specific assumptions used in the process)

Consider changes for future implementation

23

Best Practices for Managing the Quota Setting Process

1. Segment customers to determine differences in size, buying practices and growth rates

2. Invest in data and methodology to calculate sales potential at the account or territory level

3. Break down revenue into retained, penetrated, and acquired (new account) categories to understand the real underlying growth dynamics

4. Understand sales capacity using sales process, time allocation, and funnel shape

5. Consider ramp-up and onboarding pace for new hires

6. Strengthen quota links to compensation with thresholds, accelerators

On top of these techniques, the owners of the quota-setting process should expand periodic measurement, modeling and communication

with the sales force to understand quota performance drivers

24

Inside Sales Reps

Account Executives

Different segments covered by different roles may require distinctquota-setting processes

Strategic Account Managers

CAMsProductSpecialists

Segments Financial Services

Telecom Healthcare Utilities Retail Consumer Goods

Govt.

Global / Strategic

$3000 M $500 M $400 M $300 M $400 M $150 M $1000 M

Major $1000 M $400 M $200 M $200 M $100 M $100 M $500 M

Core $500 M $200 M $100 M $100 M $0 $50 M $250 M

Small $250 M $100 M $50 M $0 $0 $30 M $120 M

Total $4750 M $1200 M $750 M $600 M $500 M $330 M $1870 M

$10 B

1

25

Estimating Sales Potential by account sets up a more meaningful discussion about goals

# Physicians in Practice

Sales Potential

Best Fit Line y = 1253x+2918

12

$17,954

2

26

Growth goals can be significantly easier or harder based on different retention trends

Year 2 Revenue

$1.15B

Year 1 Revenue

$1.0B

Retain

85% or$850M

Penetrate

20% or$200M

Acquire

10% or$100M

15% Net Growth

Requires 35% Gross Growth

Churn

15% or$150M

Growth Levers

3

27

Sales is like any other work process… basic rules of time and motionstill apply. Quotas must also take sales capacity into account.

Generate Lead

Generate Lead

Qualify Lead

Qualify Lead

Design & ProposeDesign

& ProposeNegotiate & Close

Negotiate & Close

Fulfill & Deliver

Fulfill & Deliver

Service & RetainService & Retain

4Hours

4Hours

6Hours

6Hours

30Hours

30Hours

25Hours

25Hours

45Hours

45Hours

20Hours

20Hours

4000 Man-hours

4000 Man-hours

4200 Man-hours

4200 Man-hours

12000 Man-hours

12000 Man-hours

5000 Man-hours

5000 Man-hours

9000 Man-hours

9000 Man-hours

3400 Man-hours

3400 Man-hours

1000Leads1000Leads

700Leads700

Leads400

Proposals400

Proposals200

Wins200

Wins200

Deliveries200

Deliveries170

Retained170

Retained

Knowing sales potential is half of the equation… a good manager will also seek an understanding of sales capacity and raise a red flag when

process yield doesn’t seem to match the business plan and quotas

4

28

Quotas need to reflect the amount of time it takes to ramp up new salespeople

Ramp-Up of BDM New Hires

0

50

100

150

200

250

300

350

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

Month After Hire

AS

P

Top 1/3 of New Hires

Bottom 1/3 of New Hires

Middle 1/3 of New Hires

Average of All New HiresAverage of All AMs

$K

5

29

A sound quota setting process produces the desired distribution of performance around goal and the appropriate awards

Performance Range

100% 150%0%

Top 10% ofPerformers

TTC$150K Base

Salary$100K

TargetVariable

$50K

1:1Upside

+$50K

2:1Upside

+$50K

2X

4X

6

Target Total Compensation, pay mix, upside, and quota performance should work together

30

“World Class” Quota Setting Practices

Credibility ofMethodology

Credibility ofMethodology

Method is clear Field input is possible Process is consistent

Objective data sources are highly credible Reps are able to “test” goals for reasonableness with some or similar

data Subjective estimates forced through a disciplined, collaborative process

Clear goaling philosophy and strategy Where motivation is key, goal = “base hit” and stretch goal = “home run”

Manage distribution of achievement needs: if all must be stars, some great ones will leave

Motivate all performers

• Decide and stick with risk to be borne by acct mgrs Match income opportunity to risk If exemptions are granted, set consistent policies

Credibility ofInformation

Credibility ofInformation

Motivation and

Discipline

Motivation and

Discipline

Sales Culture

Sales Culture

Specificity and

Flexibility

Specificity and

Flexibility

Selected GoalSetting Variables World Class Practices

31


Break

32


Quota Management Practices Survey Results

33

Survey Demographics

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63%

37%

Participant Ownership Structure

Publicly Traded

Privately-Held

34

Survey Demographics


Direct to Consumers

Government

B2B - Indirect

B2B - Direct to End User

0% 10% 20% 30% 40% 50% 60% 70% 80%

33%

31%

50%

67%

Sales Channel

35

Survey Demographics


Financial Services (Insurance--P&C, Life, Health)

Other (please specify)

Health Care (Other)

Distribution

Transportation

Health Care (Medical Devices)

Business/Professional Services

Technology (Software, Hardware, and/or Services)

Financial Services (Other)

Real Estate

Consumer Services

Consumer Products

Chemicals

Health Care (Pharmaceutical)

Telecommunications

Manufacturing - B2B Durable goods

Retail

0% 5% 10% 15% 20% 25%

4%

12%

2%

4%

2%

6%

6%

22%

4%

2%

4%

4%

6%

4%

4%

8%

4%

Industries

36

Survey Demographics


0 - 500 500 - 1,000 1,000 - 1,500 1,500 - 2,000 2,000 - 2,500 > 2,5000%

10%

20%

30%

40%

50%

60%

70%

61%

20%

2%

9%

2%5%

Number of Sales Employees

37

Survey Demographics


< $1 $1 - $2 $2 - $3 $3 - $4 $4 - $5 > $50%

5%

10%

15%

20%

25%

30%

35%

40%

45%

40%

18%

13%

3%

10%

18%

Sales Organization Revenue Size (in $ bil-lions)

38

Survey Demographics


Percentile Revenue per Salesperson

10th $1,268,441

20th $2,256,410

30th $2,507,857

40th $2,859,344

50th $3,112,500

60th $3,481,026

70th $3,991,117

80th $7,914,230

90th $16,221,948

Survey Demographics


0 -1% 1- 2% 2 - 3% 3 - 4% 4 - 5% 5 - 6% 6 - 7% 7 - 8% > 8%0%

5%

10%

15%

20%

25%

21%

24%

18%

3%

18%

3% 3% 3%

9%

CCOS% (Compensation Cost of Sales)

40

Survey Demographics


< 0% 0 - 5% 5 - 10% 10 - 20% 20 - 30% 30 - 40% 40 - 50% > 50%0%

5%

10%

15%

20%

25%

30%

35%

7%

33%

26%

21%

7%

2%

0%

2%

Prior Year Revenue Growth Rate

41

Survey Demographics


0 - 5 5 - 10 10 - 15 15 - 20 > 200%

10%

20%

30%

40%

50%

60%

23%

48%

20%

7%

2%

Span of Control: Sales Reps Per Manager

42

Survey Demographics


< 50% 50 - 75% 75 - 100% 100%0%

10%

20%

30%

40%

50%

60%

70%

5% 5%

26%

63%

Proportion of Sales Headcount Carrying a Quota

43


58%

11%

31%

Allocation of Individual Sales Contributors’ Quotas

Individual

Team

Combination

Quota Setting Process

44



Strategic customers

New customers

Key/strategic products

Units

Gross profit

Revenue

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

17%

24%

31%

26%

36%

81%

Measures with Quotas

45


7%

2%

52%

28%

11%

Quota Time Period

Month

Quarter

Annual

Multiple periods (e.g., quarter and annual)



46



27%

41%

11%

20%

Quota Communication Timing

Prior to the beginning of the per-formance period

Within 30 days after the beginning of the performance period



47



Product Marketing

General Management

Human Resources (including Compensation)

Finance

Sales Operations

Sales

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%100%

13%

35%

22%

76%

46%

91%

Functions Involved in the Quota-Setting Process

48




Product Marketing

General Management

Human Resources (including Compensation)

Finance

Sales Operations

Sales

0% 5% 10% 15% 20% 25% 30% 35% 40% 45%

2%

4%

4%

4%

20%

22%

42%

Function of Primary Owner of the Quota-Setting Process

49



Hybrid/Combination/Other (please specify)

Hybrid

Top-Down Simple Increase - Exclusively top down methodology where everyone gets the same growth goal (like 5%) over prior year final results or quota.

Individual Last Year Plus - Exclusively top down methodology where management gives everyone different growth goals.

Fair Share Allocation - Bottom-up sales potential is used to allocate top down overall number proportionately

Bottom-up Sales Potential - Exclusively bottom up methodology based on cumulative sales input about client opportunity.

0% 5% 10% 15% 20% 25%

23%

23%

18%

16%

12%

9%

Method that Best Describes Quota-Setting Phi-losophy

50



Factors/Data Sources Considered When Setting and Allocating Quotas

Factor/ Data Source Percent of companies who consider this factor

Of companies who consider this factor, they rank it as being a…

Primary Driver Secondary Consideration

Minor Consideration

Prior actual sales results 93% 87% 8% 5%

Prior quota attainment % 77% 13% 60% 27%

Market potential 90% 49% 38% 14%

Current market share 75% 27% 33% 40%

Geographic market growth or decline

85% 30% 45% 24%

Changes in customer base 85% 45% 18% 36%

Units in place, lease life, etc. 36% 7% 57% 36%

Sales rep experience 69% 19% 41% 41%

Manager judgment 85% 9% 58% 33%

Market economic data 82% 25% 28% 47%

51

Almost 2/3s of companies do apply seasonality to goals


65%

35%

Is seasonality applied?

Yes

No

52

Most companies expect the majority of their salespeople to meet or exceed their goals


0 - 20% 20 - 40% 40 - 60% 60 - 80% 80 - 100%0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

3%0%

30%28%

40%

Percent of Sales People Expected to Achieve 100% or Greater

53

% of Sales People Expected to Achieve 100% or Greater

Most companies add 0-10% on top of the sum of individual contributors’ unique quotas when providing broad quota estimates to Finance


0% or No Response

> 0 - 5% 5 - 10% 10 - 15% 15 - 20% > 20%0%

10%

20%

30%

40%

50%

60%

53%

8%

16%

12%

4%6%

Buffer Percent

54

Note: We are assuming that blank responses to this question mean 0%.

Most companies allow quota changes mid-period


74%

26%

Are quota changes allowed mid-period?

Yes

No

55

There are a variety of reasons why companies might change quotas within a given period


Key product launch date change

Marketing budget change

Significant over-performance

Significant under-performance

Territory change

Economic recession

Natural disaster

Customer bankruptcy

0% 10% 20% 30% 40% 50% 60% 70%

31%

17%

31%

34%

66%

23%

46%

26%

Reasons for Changes in Quota Within a Period

56

Most companies do set quotas that represent a decline in year-over-year performance


75%

25%

Do you ever set quotas that represent a decline in year-over-year performance?

Yes

No--it is against our company's policy to set goals that represent a year-over-year decline

57

The vast majority of companies do not set a maximum percentage that quotas can be increased over last year’s results


7%

93%

Is there a maximum percentage increase for quotas?

Yes

No

58

There is about an even split between the 3 main philosophies of treating windfalls


36%

28%

36%

Current Philosophy Around Windfalls

We add some portion (between 1% and 99%) of the windfall into the next year's quota

We fully load "windfall" sales into the next year's quota (i.e., we do not recognize any sales as a windfall)

We treat windfalls as one-time events and do not load the wind-falls into the next year's quota at all

59

Most companies simply use Excel for the quota-setting process, with the second most popular choice being a CRM system


CRM system with quota-setting capabilities (e.g., Salesforce.com)

Sales compensation plan administrative software that includes quota-setting capabilities

Externally provided (as from a consultant) quota-setting software

Internally developed quota-setting software

Access or similar database software

Excel or similar spreadsheet software

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

25%

5%

5%

8%

10%

85%

Software Tools Used for Quota-Setting Process

60

Most companies use consistent quota setting practices for all business units and customer segments in the United States


65%

35%

Are there consistent quota setting practices for all business units and customer seg-

ments?

Yes No

61

Average Revenue: $2.73 billionAverage # of EEs: 2056

Average Revenue: $2.46 billionAverage # of EEs: 424

Half of companies use consistent quota setting practices for all business units and geographies globally, and the other half do not


50%50%

Are there consistent quota setting practices for all business unit and geographies glob-

ally?

Yes No

62

Average Revenue: $4.02 billionAverage # of sales EEs: 1545

Average Revenue: $2.83 billionAverage # of sales EEs: 461

Performance to quota are used in a number of programs and processes


Base salary or base salary increase

Performance improvement plans

Promotion criteria

Performance assessment/review

Stock Awards,

President's Club/recognition

Short term incentive plan calculations/structure

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

39%

68%

45%

84%

0%

68%

84%

Processes and/or programs that use quota attainment as an input

63

Most companies communicate quota attainment to their sales forces monthly


46%

21%

7%

25%

How often quota attainment is communicated to the sales force

Monthly

Quarterly

Annually

On Demand Reporting

64

Most companies do not publish stack rankings of quota performance


34%

66%

Are stack rankings of quota per-formance published?

Yes

No

65

Is this a missed opportunity?

Only about 35% of companies exceeded goal last fiscal year!


< 80% 80 - 90% 90 - 100% 100 - 110% 110 - 120% > 120%0%

5%

10%

15%

20%

25%

30%

35%

40%

22%

9%

35%

26%

9%

0%

Sales organization performance against goal in last completed fiscal year

66

Yet 43% of companies paid out more than target pay!!


< 50% 50 - 80% 80 - 90% 90 - 100% 100 - 110% 110 - 120% > 120%0%

5%

10%

15%

20%

25%

30%

35%

10% 10% 10%

29% 29%

0%

14%

How much sales incentive was paid out relative to target amount?

67

19% of respondents had greater than 60% of their sales people meeting or exceeding goal in the last fiscal year


0 - 20% 20 - 40% 40 - 60% 60 - 80% 80 - 100%0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

12%

38%

31%

15%

4%

Percent of sales people that attained greater than or equal to 100% of quota in

last completed fiscal year

68

1/3 of respondents report setting overall sales goals below prior year actuals


< 90% 90 - 95% 95 - 100% 100 - 105% 105 - 110% 110 - 115% > 115%0%

5%

10%

15%

20%

25%

30%

9% 9%

18%

23%

27%

9%

5%

Sales organization goal growth over last year’s actual goal achievement

69

Most companies believe that they execute the quota-setting process at an average level


27%

50%

20%

3%

How well do you believe your company executes the quota-setting process?

Somewhat well

Average

Somewhat poorly

Very poorly

70

Most companies would described their quotas as being accurately set at the beginning of each period


7%

73%

20%

How would you describe the accuracy of quotas set at the beginning of each period?

Very accurate Accurate

Inaccurate

71

If goals are accurate, then why are only 19% of the companies report having > 60% of their salespeople exceeding quota? Is there a management process gap?

There are a variety of issues that companies believe they face relative to quota-setting


Negotiation of quotas favors more senior reps

Mid-year changes create perception of gaming

Change management from a commission plan to a quota-based bonus plan

Unclear ownership of quotas

Meaningless quotas with no impact on pay, promotion, or recognition

Over-burdening top performers with higher quotas

Inability to set accurate quotas

Sandbagging by reps (and management)

Failure to communicate quota-setting methodology

Lack of visibility into future market growth

Failure to communicate quotas in a timely fashion

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

7%

14%

14%

14%

21%

21%

25%

29%

32%

43%

46%

What issues is your sales organization currently experiencing relative to quota-setting?

72

Most companies rank the allocation process and how individual quotas are determined as being their top improvement area in quota-setting


Timeliness of process

Communication to reps about process

Use of data to inform quota decisions

Allocation process and how individual quotas are determined

Setting the overall goal

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

15%

4%

21%

36%

26%

19%

12%

25%

32%

19%

19%

38%

29%

12%

0%

15%

35%

14%

16%

19%

33%

12%

11%

4%

37%

Rank the following improvements that could be made to your quota-setting process

Top Choice2nd Choice3rd Choice4th ChoiceLast Choice

73

Most companies use statistics/analytics to measure the effectiveness of their quota-setting process


Management Input

Field Input

Statistics / Analytics

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

32%

20%

47%

How do you measure the effectiveness of your quota-setting process?

74

About half of all companies are planning on making changes to the quota-setting process in the next 12 months


55%

45%

Are you currently planning to make any of the quota-setting process changes you identified above in the next 12 months?

Yes No

75

What’s Changed Between the Results from 2009 and the 2013


Question Results From 2009 Results from 2013

Growth Rate 36% < 0% 14% < 0%

Buffer Percent 66% < 5% 47% = < 5%

Frequency of Quota Setting 62% = Annually 52% = Annually

Given all of the problems we’ve talked about today regarding quota setting, why have so few practices changed?


Quota Setting Key Issues and Lessons Learned

77

Discussion #3

How does your company’s practices compare to the survey results?– What are notable differences?

What are the 3 biggest takeaways for you from the survey? If you don’t use quotas, what alternatives to quotas do you have?

78

What if there were no quota’s to create?

Alternatives Standards of performance by

role/level Growth vs prior period Quota for team, not individual % of prior period 1st $ commissions Commissions above X% of prior

period Everyone on the “corporate plan” MBO’s only Trips and toasters only! No incentives at all!


Implications Loss of direction connection to

management goals Loss of direct accountability for

performance to a goal Loss of linkage to potential within

the territory Motivation via earnings, not

performance to goal More dependence on

management process and capabilities to drive results


Group Feedback and Next Steps


Sales Compensation Subgroup

What specific topics would you like to see in the future?

When would you like to hold the next session? (September, October, or November?)

Who might be willing to host the next event?

81

Thank You for Attending!

Thank You Cargill!

Have Quotas Overstayed Their Welcome? May 10, 2013 Hosted by Cargill Prepared by Consulting Performance, Reward & Talent | Sales Force Effectiveness Presentation.

Documents

consulting performance

years sales compensation

sales forces

sales organization

quota setting approaches

quota setting problem

sales management programs

quota negotiation