Why implement a quota system.


Quota. The word alone can send shivers down the spines of salespeople. The bad feelings associated with quotas are unfortunate. A quota should be a salesperson’s best friend. When created properly, a quota helps define the sales journey.

Quotas are a means to motivate salespeople, provide clear direction, and help salespeople self manage their performance. When sales expectations are broken down into simple manageable pieces, it’s easier for everyone to achieve overall sales team objectives. A well thought out quota system will shorten new hire ramp-up, deliver sales earlier in the quarter, reduce slumps and increase management efficiency.

Shorten the ramp-up:

For a new hire, the quota should extend beyond closed sales. If you are really trying to help a new salesperson, be very clear in performance expectations. Define simple goals/quotas in key ares of performance. These need to be measured in short periods of time. By doing this, you and the new hire can better see development.

The bottom line in sales is production. The sales quota is what will drive the internal fire of a new hire.  Create a quota system for your new hires that drives performance and is based on the reality of your company and market.

Deliver sales earlier:

Sales quotas aren’t just for new hires. They should be a means to increase performance for tenured and producing salespeople. When you establish quotas, your business now has a simple metric in place to build incentives. Creating incentives from your quota system can help drive sales earlier in a business cycle.

My quotas are developed on past company performance, current market conditions and long term company goals. Using these factors, it’s rather simple to create incentives to highlight areas of need in the short term that help meet long term company objectives. I usually define my team quotas to meet average industry sales and develop short term Sales Promotion Incentive Fund’s (SPIF’s) to reward outstanding production. Why? Let’s face it,  producers don’t care about quota —  they care about income. It’s through quota based SPIF’s that you can influence their production. Create SPIF’s that rewards early deals and above average quarterly performance.

Reduce Slumps:

The great thing about slumps is they can only occur on a team with producers. The bad thing about slumps is if you catch them late in the game, that can end a sales career or a good sales year. Proper quota management will allow you to see slumps before they destroy a quarter and help to recover lost sales once identified.

It’s not the quota itself that will reduce slumps. It’s the tools used to manage a quota that will help reduce slumps. Proper quota management requires using a set of business drivers that can be easily viewed on short notice. The metrics should be available not just to management, but also to frontline sales. Most slumps today are the direct result of inaction or too much production at an earlier point in time.

A quota system will implement the system required to identify slumps at the cause level so they can be acted upon before reducing sales. While this may sound complex, it is easy once your metric system is implemented.

Increase management efficiency:

When quotas are in place, salespeople and managers gain a better understanding of where they are and where they need to go. This is not to say all we need to do is stick a number on the board and sales will happen.

A sales quota is something that can be easily managed. Once a quota is established, the salesperson and manager need to work together to get there. Getting there is done through forecasting, task management and day-to-day conversation with salespeople. A quota and its parts should hold everything in format so that after you put out the fires of the day, everyone can see what happened and what needs to happen.

To gain this efficiency, a system of measurement needs to be in place. The measurement tools should be globally available so that the salesperson and management are always aware of what is happening.

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