uu - Columbus Compensation Association

Report
Have Quotas Overstayed Their Welcome?
May 10, 2013
Hosted by Cargill
Prepared by Consulting
Performance, Reward & Talent | Sales Force Effectiveness
Presentation to the Twin Cities Compensation Network
Sales Compensation Subgroup
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 & Talent
Proprietary & Confidential | 10/2012
About Us
Rob
Steve
 Aon Hewitt Associate Partner and
Manager, based in Lincolnshire, IL
 Aon Hewitt Partner, based in Lincolnshire,
IL
 ~17 years sales compensation and
effectiveness experience
 >25 years sales effectiveness experience
 Insurance/financial services, consumer
products, health care, manufacturing
Consulting | Performance, Reward & Talent
Proprietary & Confidential | 10/2012
 Medical products/pharma, CPG, financial
service, general manufacturing
2
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?
Consulting | Global Compensation & Talent
Proprietary & Confidential | AA/SF/GCSOF.PPT/LS-11581 02/2012
3
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?
Consulting | Global Compensation & Talent
Proprietary & Confidential | AA/SF/GCSOF.PPT/LS-11581 02/2012
4
Quota Setting Approaches and Best Practices
Consulting | Performance, Reward & Talent
Proprietary & Confidential | 10/2012
5
5
Companies Commonly See One or More of the Following as Potential
Indicators of a Quota Setting Problem…
Too-Many or Too-Few
Reaching Quota
Number of Reps
Number of Reps
Wide or Uneven
Distribution of Attainment
100%
Quota Achievement
100%
Quota Achievement
Disconnect Between Best
Reps and High Achievement
Rep
Perf.
Top Reps
Rob
85%
Jane
90%
Sally
95%
Paul
105%
Brian
100%
Kim
115%
Bottom
Reps
Rep
Achievement
Business
Achievement
Number of Reps
Group
Quota Achievement Not
Aligned With Business Plan
100%
Quota Achievement
6
100%
95%
…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!
7
Quota Setting in a Sales Performance Context
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
Understand
Business Drivers




Selling and Service Model
Job Roles and Structure
Deployment Planning
Enablement Through
Support Infrastructure
Talent
Management





Assessments
Recruiting and Selection
Career Paths
Training and Development
Leadership and
Management Process
Performance
and Rewards
 Performance Management
 Quotas and Measurement
 Compensation and
Recognition
Customer Insight and
Segmentation
Business Strengths
Value Proposition
Competitive Dynamics
Realize Business
Impact
Align the Sales Force
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…
Problems with quota setting and allocation can undermine the effectiveness of other
sales management programs… leading to slow growth and poor profitability
8
Factors That Need to Be Reflected in the Quota
2013
+
+
2012
Beginning
of Year
Revenue
Customer
Churn
Retention
+
CrossSelling
-
Customer
ScaleBack
+
Price
Increases
=
Up-selling
New Prods
Expansion
Customer
Acquisition
New Sales
End of
Year
Revenue
Base Business Net Growth
To maximize effectiveness, sales processes, roles, management processes and key
enablers should be properly aligned and connected with these elements of growth.
Performance, Reward, & Talent | Sales Force Effectiveness
Proprietary & Confidential | Motorola – Sales Compensation Workshop 041713
9
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, & Roles
2.
Eligibility
5.
Upside Opportunity
8.
Quotas/Crediting
3.
Target Pay Levels
6.
Measures/Weights
9.
Payout Timing
4.
Pay Mix
7.
Mechanics
10.
Administration
Competitive
Aligned
Effective
10
Quotas tend to emerge as a tool to manage productivity and cost as companies
mature
I
II
III
IV
Start-up
High Growth
Optimization
Maturity
Characteristics:
Characteristics:
Commissions
Commissions
High Risk
Moderate Risk
Simple Territories
Split Territories
Solo Credit
Split Credit
Characteristics:
Characteristics:
Quota/Bonus
Quota/Bonus
Moderate Risk
Lower Risk
Accounts/Territories
Accounts/Segments
Multiple Credit
Team Credit
$0 - 100 Million
$100M - $1B
$1B - $5B
$5B+
30 to 50% CAGR
20 to 40% CAGR
10 to 20% CAGR
-10 to 10% CAGR
11
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
… which lead to 4 “Golden Rules”
that guide our perspective
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
12
Spectrum of goal setting sophistication …
Goals from
the top of the
organization
are
distributed
evenly
Goals are
devised
through
econometric
modeling and
predictive
statistics
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!
13
Best practice is to strive to achieve the “ideal” distribution of performance to goal
Target level equates to
100% of plan
60-70%
of Sellers
30-40%
of Sellers
Number of
Salespeople
Bottom10%
of Sellers
T op10%
of Sellers
T hreshold
100%
Excellence
Goal Performance
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
14
Across businesses and industries, there are essentially four approaches
to allocating quotas to the sales force
Increasing
Complexity,
Increasing
Precision
Equal Allocation
• The overall business goal is
divided by the number of reps
• All reps receive the same quota
“Last Year Plus”
• An overall growth goal is identified
• The growth rate to historical sales
in the territory
Opportunity
Adjustments
• An “average quota” is established
• Adjustments are made based on
territory opportunity
“Bottoms Up”
Market Potential
• Territory potential drives the quota
• Adjustments are made to ensure
business goals are met
15
Approach
Equal Allocation
• The overall business goal is
divided by the number of reps
• All reps receive the same quota
General Advantages
Advantages
and
Disadvantages
Streamlined allocation process;
limited data and iterations
required
Easy to synchronize with the
overall business plan
Easy to communicate
Applicability
Appropriate
When…
General Disadvantages
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
16
Approach
“Last Year Plus”
• An overall growth goal is identified
• The growth rate to historical sales
in the territory
General Advantages
Advantages
and
Disadvantages
Streamlined approach; easy to
communicate
Assumed historical results
were appropriate
Past results can serve as a
proxy for territory composition,
linking the objective to potential
Tends to be seen as punitive
by top performing reps,
particularly those with
abnormal one-time wins
Easy to align with business
growth goals
Applicability
General Disadvantages
Appropriate
When…
1. Applied to “annuity” businesses or products
2. Relatively consistent historical results and
growth potential across territories
17
Approach
• An “average quota” is established
• Adjustments are made based on
territory opportunity
Opportunity
Adjustments
General Advantages
Reflects territory potential
Advantages
and
Disadvantages
Relatively easy to
communicate and align with
the business goal
Provides management
flexibility
Applicability
Appropriate
When…
General Disadvantages
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
18
Approach
“Bottoms Up”
Market Potential
• Formulaic potential modeling drives
the quota
• Adjustments are made to reflect
reality
General Advantages
Advantages
and
Disadvantages
Best reflects territory
opportunity, thus most clearly
identifies top performers
(versus “cherry picking”)
Data-driven and defendable;
less subject to discretion and
politics
Applicability
Appropriate
When…
General Disadvantages
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
19
An important input for account planning is the total potential in an
account and your share of that potential
Revenue
The revenue you
realized from the
account this year
+
Opportunity
=
Total Account
Potential
+
Your Competitors’
Account Revenue
+
Opportunity
=
Total
Potential
Is it accurate?
Is it reasonable?
20
Discussion #2
Which should have a higher growth goal?
 Rep A
 Rep B
– $2 million in annual gross margin
– $1.2 million in annual gross margin
– 5% annual growth
– 10% annual growth
– 100 customers in a 500 customer
territory
– 50 customers in a 250 customer
territory
– Territory has $10 million in gross
margin potential (20% share)
– Territory has $4 million in gross
margin potential (30% share)
21
An Approach to the Modifying Quota Process (High Level)
Problem Statement
and Solution
Identification
 Understand
concerns about
existing quota setting
process
 Identify systems and
data availability/
constraints
 Identify potential
methodologies;
select preferred
approach
Tool Creation
and Process
Execution
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
Rollout and
Monitoring
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
22
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
23
Different segments covered by different roles may require distinct
quota-setting processes
1
Segments
Financial
Services
Telecom
Healthcare
Utilities
Retail
Consume
r 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 MCAMs$500 M
Product
Specialists
Core
$500 M
Small
$250 M
Total
$4750 M
Strategic Account Managers
Account Executives
$200 M
$100 M
$100 M
$0
$50 M
$250 M
$100 M
$50 M
$0
$0
$30 M
$120 M
$1200 M
$750 M
$600 M
$500 M
$330 M
$1870 M
Inside Sales Reps
$10 B
24
Estimating Sales Potential by account sets up a more meaningful discussion
about goals
Best Fit Line y = 1253x+2918
Sales
Potential
$17,954
12
# Physicians in Practice
25
2
Growth goals can be significantly easier or harder based on different
retention trends
15% Net
Growth
Requires 35%
Gross Growth
Acquire
10% or
$100M
Year 2
Revenue
$1.15B
Penetrate
Year 1
Revenue
$1.0B
Churn
15% or
$150M
20% or
$200M
Retain
85% or
$850M
Growth Levers
26
3
Sales is like any other work process… basic rules of time and motion
still apply. Quotas must also take sales capacity into account.
Generate
Lead
Qualify
Lead
Design
& Propose
Negotiate
& Close
Fulfill
& Deliver
Service
& Retain
4
Hours
6
Hours
30
Hours
25
Hours
45
Hours
20
Hours
1000
Leads
700
Leads
400
Proposals
200
Wins
200
Deliveries
170
Retained
4000
Man-hours
4200
Man-hours
12000
Man-hours
5000
Man-hours
9000
Man-hours
3400
Man-hours
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
27
4
Quotas need to reflect the amount of time it takes to ramp up new
salespeople
5
Ramp-Up of BDM New Hires
350
300
Top 1/3 of New Hires
250
Average of All AMs
Average of All New Hires
150
Middle 1/3 of New Hires
100
Bottom 1/3 of New Hires
ASP
$K
200
50
0
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
Avg - New Hire
Avg - All DMs
Low 1/3
Mid 1/3
Top 1/3
28
A sound quota setting process produces the desired distribution of
performance around goal and the appropriate awards
+$50K
2:1
Upside
+$50K
1:1
Upside
$50K
TTC
$150K
4X
2X
Target
Variable
0%
$100K
Base
Salary
100%
Top 10% of
Performers
150%
Performance Range
Target Total Compensation, pay mix, upside, and quota
performance should work together
29
6
“World Class” Quota Setting Practices
Selected Goal
Setting Variables
World Class Practices
 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
30
Break
Consulting | Performance, Reward & Talent
Proprietary & Confidential | 10/2012
31
31
Quota Management Practices Survey Results
Consulting | Performance, Reward & Talent
Proprietary & Confidential | 10/2012
32
32
Survey Demographics
Participant Ownership Structure
37%
Publicly Traded
Privately-Held
63%
Consulting | Talent & Rewards/Sales Force Effectiveness
Proprietary & Confidential | 01332031.PPT 0149664 013012
33
Survey Demographics
Sales Channel
B2B - Direct to End User
67%
B2B - Indirect
50%
Government
31%
Direct to Consumers
33%
0%
Consulting | Talent & Rewards/Sales Force Effectiveness
Proprietary & Confidential | 01332031.PPT 0149664 013012
10%
20%
30%
40%
50%
34
60%
70%
Survey Demographics
Industries
Retail
4%
Manufacturing - B2B Durable goods
8%
Telecommunications
4%
Health Care (Pharmaceutical)
4%
Chemicals
6%
Consumer Products
4%
Consumer Services
4%
Real Estate
2%
Financial Services (Other)
4%
Technology (Software, Hardware, and/or Services)
22%
Business/Professional Services
6%
Health Care (Medical Devices)
6%
Transportation
2%
Distribution
4%
Health Care (Other)
2%
Other (please specify)
12%
Financial Services (Insurance--P&C, Life, Health)
4%
0%
Consulting | Talent & Rewards/Sales Force Effectiveness
Proprietary & Confidential | 01332031.PPT 0149664 013012
5%
10%
15%
35
20%
25%
Survey Demographics
Number of Sales Employees
70%
61%
60%
50%
40%
30%
20%
20%
9%
10%
2%
2%
5%
0%
0 - 500
500 - 1,000
Consulting | Talent & Rewards/Sales Force Effectiveness
Proprietary & Confidential | 01332031.PPT 0149664 013012
1,000 - 1,500
1,500 - 2,000
2,000 - 2,500
36
> 2,500
Survey Demographics
Sales Organization Revenue Size (in $
billions)
45%
40%
40%
35%
30%
25%
20%
18%
15%
18%
13%
10%
10%
5%
3%
0%
< $1
$1 - $2
Consulting | Talent & Rewards/Sales Force Effectiveness
Proprietary & Confidential | 01332031.PPT 0149664 013012
$2 - $3
$3 - $4
$4 - $5
37
> $5
Survey Demographics
Consulting | Performance, Reward & Talent
Proprietary & Confidential | 10/2012
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
38
Survey Demographics
CCOS%
(Compensation Cost of Sales)
25%
24%
21%
20%
18%
18%
15%
10%
9%
5%
3%
3%
3%
3%
5 - 6%
6 - 7%
7 - 8%
0%
0 -1%
1- 2%
Consulting | Talent & Rewards/Sales Force Effectiveness
Proprietary & Confidential | 01332031.PPT 0149664 013012
2 - 3%
3 - 4%
4 - 5%
39
> 8%
Survey Demographics
Prior Year Revenue Growth Rate
35%
33%
30%
26%
25%
21%
20%
15%
10%
7%
7%
5%
2%
2%
0%
0%
< 0%
0 - 5%
Consulting | Talent & Rewards/Sales Force Effectiveness
Proprietary & Confidential | 01332031.PPT 0149664 013012
5 - 10%
10 - 20%
20 - 30%
30 - 40%
40 - 50%
40
> 50%
Survey Demographics
Span of Control: Sales Reps Per Manager
60%
50%
48%
40%
30%
23%
20%
20%
10%
7%
2%
0%
0-5
Consulting | Talent & Rewards/Sales Force Effectiveness
Proprietary & Confidential | 01332031.PPT 0149664 013012
5 - 10
10 - 15
15 - 20
41
> 20
Survey Demographics
Proportion of Sales Headcount Carrying a
Quota
70%
63%
60%
50%
40%
30%
26%
20%
10%
5%
5%
< 50%
50 - 75%
0%
Consulting | Talent & Rewards/Sales Force Effectiveness
Proprietary & Confidential | 01332031.PPT 0149664 013012
75 - 100%
100%
42
Quota Setting Process
Allocation of Individual Sales
Contributors’ Quotas
Individual
31%
Team
58%
Combination
11%
Consulting | Talent & Rewards/Sales Force Effectiveness
Proprietary & Confidential | 01332031.PPT 0149664 013012
43
Quota Setting Process
Measures with Quotas
Revenue
81%
Gross profit
36%
Units
26%
Key/strategic products
31%
New customers
24%
Strategic customers
17%
0%
Consulting | Talent & Rewards/Sales Force Effectiveness
Proprietary & Confidential | 01332031.PPT 0149664 013012
10%
20%
30%
40%
50%
60%
44
70%
80%
90%
Quota Setting Process
Quota Time Period
2%
11%
7%
Month
Quarter
Annual
28%
52%
Multiple periods (e.g.,
quarter and annual)
Other (please
specify)
Consulting | Talent & Rewards/Sales Force Effectiveness
Proprietary & Confidential | 01332031.PPT 0149664 013012
45
Quota Setting Process
Quota Communication Timing
21%
27%
Prior to the beginning of the
performance period
Within 30 days after the beginning
of the performance period
11%
Within 60 days after the beginning
of the performance period
41%
Consulting | Talent & Rewards/Sales Force Effectiveness
Proprietary & Confidential | 01332031.PPT 0149664 013012
Within 90 days after the beginning
of the performance period
46
Quota Setting Process
Functions Involved in the Quota-Setting
Process
Sales
91%
Sales Operations
46%
Finance
76%
Human Resources (including Compensation)
22%
General Management
Product Marketing
35%
13%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90%100%
Consulting | Talent & Rewards/Sales Force Effectiveness
Proprietary & Confidential | 01332031.PPT 0149664 013012
47
Quota Setting Process
Function of Primary Owner of the QuotaSetting Process
Sales
42%
Sales Operations
22%
Finance
20%
Human Resources (including Compensation)
4%
General Management
4%
Product Marketing
4%
Other (please specify)
2%
0%
Consulting | Talent & Rewards/Sales Force Effectiveness
Proprietary & Confidential | 01332031.PPT 0149664 013012
5% 10% 15% 20% 25% 30% 35% 40% 45%
48
Quota Setting Process
Method that Best Describes Quota-Setting
Philosophy
Bottom-up Sales Potential - Exclusively bottom up
methodology based on cumulative sales input about
client opportunity.
9%
Fair Share Allocation - Bottom-up sales potential is
used to allocate top down overall number
proportionately
12%
Individual Last Year Plus - Exclusively top down
methodology where management gives everyone
different growth goals.
16%
Top-Down Simple Increase - Exclusively top down
methodology where everyone gets the same growth
goal (like 5%) over prior year final results or quota.
18%
Hybrid
23%
Hybrid/Combination/Other (please specify)
23%
0%
Consulting | Talent & Rewards/Sales Force Effectiveness
Proprietary & Confidential | 01332031.PPT 0149664 013012
5%
10%
15%
49
20%
25%
Quota Setting Process
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%
Consulting | Talent & Rewards/Sales Force Effectiveness
Proprietary & Confidential | 01332031.PPT 0149664 013012
50
Almost 2/3s of companies do apply seasonality to goals
Is seasonality applied?
35%
Yes
No
65%
Consulting | Talent & Rewards/Sales Force Effectiveness
Proprietary & Confidential | 01332031.PPT 0149664 013012
51
Most companies expect the majority of their salespeople to meet or
exceed their goals
Percent of Sales People Expected to
Achieve 100% or Greater
45%
40%
40%
35%
30%
30%
28%
25%
20%
15%
10%
5%
3%
0%
0%
0 - 20%
20 - 40%
40 - 60%
60 - 80%
% of Sales People Expected to Achieve 100% or Greater
Consulting | Talent & Rewards/Sales Force Effectiveness
Proprietary & Confidential | 01332031.PPT 0149664 013012
52
80 - 100%
Most companies add 0-10% on top of the sum of individual contributors’
unique quotas when providing broad quota estimates to Finance
Buffer Percent
60%
53%
50%
40%
30%
20%
16%
12%
8%
10%
4%
6%
0%
0% or No
Response
> 0 - 5%
5 - 10%
10 - 15%
15 - 20%
Note: We are assuming that blank responses to this question mean 0%.
Consulting | Talent & Rewards/Sales Force Effectiveness
Proprietary & Confidential | 01332031.PPT 0149664 013012
53
> 20%
Most companies allow quota changes mid-period
Are quota changes allowed midperiod?
26%
Yes
No
74%
Consulting | Talent & Rewards/Sales Force Effectiveness
Proprietary & Confidential | 01332031.PPT 0149664 013012
54
There are a variety of reasons why companies might change quotas
within a given period
Reasons for Changes in Quota Within a
Period
Customer bankruptcy
26%
Natural disaster
46%
Economic recession
23%
Territory change
66%
Significant under-performance
34%
Significant over-performance
31%
Marketing budget change
17%
Key product launch date change
31%
0%
Consulting | Talent & Rewards/Sales Force Effectiveness
Proprietary & Confidential | 01332031.PPT 0149664 013012
20%
40%
60%
55
80%
Most companies do set quotas that represent a decline in year-over-year
performance
Do you ever set quotas that represent a
decline in year-over-year performance?
Yes
25%
No--it is against our company's
policy to set goals that represent
a year-over-year decline
75%
Consulting | Talent & Rewards/Sales Force Effectiveness
Proprietary & Confidential | 01332031.PPT 0149664 013012
56
The vast majority of companies do not set a maximum percentage that
quotas can be increased over last year’s results
Is there a maximum percentage
increase for quotas?
7%
Yes
No
93%
Consulting | Talent & Rewards/Sales Force Effectiveness
Proprietary & Confidential | 01332031.PPT 0149664 013012
57
There is about an even split between the 3 main philosophies of treating
windfalls
Current Philosophy Around Windfalls
We add some portion (between
1% and 99%) of the windfall into
the next year's quota
36%
36%
We fully load "windfall" sales into
the next year's quota (i.e., we do
not recognize any sales as a
windfall)
28%
Consulting | Talent & Rewards/Sales Force Effectiveness
Proprietary & Confidential | 01332031.PPT 0149664 013012
We treat windfalls as one-time
events and do not load the
windfalls into the next year's
quota at all
58
Most companies simply use Excel for the quota-setting process, with the
second most popular choice being a CRM system
Software Tools Used for Quota-Setting
Process
Excel or similar spreadsheet software
Access or similar database software
Internally developed quota-setting software
85%
10%
8%
Externally provided (as from a consultant)
quota-setting software
5%
Sales compensation plan administrative
software that includes quota-setting capabilities
5%
CRM system with quota-setting capabilities
(e.g., Salesforce.com)
25%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90%
Consulting | Talent & Rewards/Sales Force Effectiveness
Proprietary & Confidential | 01332031.PPT 0149664 013012
59
Most companies use consistent quota setting practices for all business
units and customer segments in the United States
Are there consistent quota setting practices for
all business units and customer segments?
Average Revenue: $2.73
billion
Average # of EEs: 2056
35%
Yes
No
65%
Average Revenue: $2.46
billion
Average # of EEs: 424
Consulting | Talent & Rewards/Sales Force Effectiveness
Proprietary & Confidential | 01332031.PPT 0149664 013012
60
Half of companies use consistent quota setting practices for all business
units and geographies globally, and the other half do not
Are there consistent quota setting practices for
all business unit and geographies globally?
Yes
50%
Average Revenue: $4.02 billion
Average # of sales EEs: 1545
Consulting | Talent & Rewards/Sales Force Effectiveness
Proprietary & Confidential | 01332031.PPT 0149664 013012
No
50%
Average Revenue: $2.83 billion
Average # of sales EEs: 461
61
Performance to quota are used in a number of programs and processes
Processes and/or programs that use quota
attainment as an input
Short term incentive plan calculations/structure
84%
President's Club/recognition
Stock Awards,
68%
0%
Performance assessment/review
Promotion criteria
84%
45%
Performance improvement plans
Base salary or base salary increase
68%
39%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90%
Consulting | Talent & Rewards/Sales Force Effectiveness
Proprietary & Confidential | 01332031.PPT 0149664 013012
62
Most companies communicate quota attainment to their sales forces
monthly
How often quota attainment is
communicated to the sales force
Monthly
25%
Quarterly
47%
7%
Annually
On Demand
Reporting
21%
Consulting | Talent & Rewards/Sales Force Effectiveness
Proprietary & Confidential | 01332031.PPT 0149664 013012
63
Most companies do not publish stack rankings of quota performance
Are stack rankings of quota
performance published?
34%
Yes
No
66%
Is this a missed opportunity?
Consulting | Talent & Rewards/Sales Force Effectiveness
Proprietary & Confidential | 01332031.PPT 0149664 013012
64
Only about 35% of companies exceeded goal last fiscal year!
Sales organization performance against
goal in last completed fiscal year
40%
35%
35%
30%
26%
25%
22%
20%
15%
9%
10%
9%
5%
0%
0%
< 80%
80 - 90%
Consulting | Talent & Rewards/Sales Force Effectiveness
Proprietary & Confidential | 01332031.PPT 0149664 013012
90 - 100%
100 - 110%
110 - 120%
65
> 120%
Yet 43% of companies paid out more than target pay!!
How much sales incentive was paid out
relative to target amount?
30%
29%
29%
25%
20%
14%
15%
10%
10%
10%
10%
5%
0%
0%
< 50%
50 - 80%
Consulting | Talent & Rewards/Sales Force Effectiveness
Proprietary & Confidential | 01332031.PPT 0149664 013012
80 - 90%
90 - 100%
100 - 110% 110 - 120%
66
> 120%
19% of respondents had greater than 60% of their sales people meeting
or exceeding goal in the last fiscal year
Percent of sales people that attained
greater than or equal to 100% of quota in
last completed fiscal year
45%
38%
40%
35%
31%
30%
25%
20%
15%
15%
12%
10%
4%
5%
0%
0 - 20%
Consulting | Talent & Rewards/Sales Force Effectiveness
Proprietary & Confidential | 01332031.PPT 0149664 013012
20 - 40%
40 - 60%
60 - 80%
67
80 - 100%
1/3 of respondents report setting overall sales goals below prior year
actuals
Sales organization goal growth over last
year’s actual goal achievement
30%
27%
25%
23%
20%
18%
15%
10%
9%
9%
9%
5%
5%
0%
< 90%
90 - 95%
Consulting | Talent & Rewards/Sales Force Effectiveness
Proprietary & Confidential | 01332031.PPT 0149664 013012
95 - 100%
100 - 105% 105 - 110% 110 - 115%
68
> 115%
Most companies believe that they execute the quota-setting process at
an average level
How well do you believe your company
executes the quota-setting process?
3%
Somewhat well
27%
20%
Average
Somewhat poorly
Very poorly
50%
Consulting | Talent & Rewards/Sales Force Effectiveness
Proprietary & Confidential | 01332031.PPT 0149664 013012
69
Most companies would described their quotas as being accurately set at
the beginning of each period
How would you describe the accuracy of
quotas set at the beginning of each period?
7%
20%
Very accurate
Accurate
Inaccurate
73%
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?
Consulting | Talent & Rewards/Sales Force Effectiveness
Proprietary & Confidential | 01332031.PPT 0149664 013012
70
There are a variety of issues that companies believe they face relative to
quota-setting
What issues is your sales organization currently
experiencing relative to quota-setting?
Failure to communicate quotas in a timely fashion
46%
Lack of visibility into future market growth
43%
Failure to communicate quota-setting methodology
32%
Sandbagging by reps (and management)
29%
Inability to set accurate quotas
25%
Over-burdening top performers with higher quotas
21%
Meaningless quotas with no impact on pay, promotion, or
recognition
21%
Unclear ownership of quotas
14%
Change management from a commission plan to a quotabased bonus plan
14%
Mid-year changes create perception of gaming
14%
Negotiation of quotas favors more senior reps
7%
0%
Consulting | Talent & Rewards/Sales Force Effectiveness
Proprietary & Confidential | 01332031.PPT 0149664 013012
10%
20%
30%
71
40%
50%
Most companies rank the allocation process and how individual quotas
are determined as being their top improvement area in quota-setting
Rank the following improvements that could be
made to your quota-setting process
Setting the overall goal
26%
Allocation process and how individual quotas
are determined
19% 0% 19%
36%
32%
37%
12%
16% 4%
Top Choice
2nd Choice
Use of data to inform quota decisions
21%
25%
29%
14%
11%
3rd Choice
4th Choice
Communication to reps about process 4% 12%
Timeliness of process
15%
0%
Consulting | Talent & Rewards/Sales Force Effectiveness
Proprietary & Confidential | 01332031.PPT 0149664 013012
38%
19%
20%
35%
19%
40%
12%
15%
60%
33%
80%
72
100%
Last Choice
Most companies use statistics/analytics to measure the effectiveness of
their quota-setting process
How do you measure the effectiveness of
your quota-setting process?
Statistics / Analytics
47%
Field Input
20%
Management Input
32%
0%
Consulting | Talent & Rewards/Sales Force Effectiveness
Proprietary & Confidential | 01332031.PPT 0149664 013012
10%
20%
30%
40%
73
50%
About half of all companies are planning on making changes to the
quota-setting process in the next 12 months
Are you currently planning to make any of
the quota-setting process changes you
identified above in the next 12 months?
Yes
45%
No
55%
Consulting | Talent & Rewards/Sales Force Effectiveness
Proprietary & Confidential | 01332031.PPT 0149664 013012
74
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?
Consulting | Talent & Rewards/Sales Force Effectiveness
Proprietary & Confidential | 01332031.PPT 0149664 013012
Quota Setting Key Issues and Lessons Learned
Consulting | Performance, Reward & Talent
Proprietary & Confidential | 10/2012
76
76
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?
77
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!
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
 No incentives at all!
Consulting | Performance, Reward & Talent
Proprietary & Confidential | 10/2012
78
Group Feedback and Next Steps
Consulting | Performance, Reward & Talent
Proprietary & Confidential | 10/2012
79
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?
Consulting | Performance, Reward & Talent
Proprietary & Confidential | 10/2012
80
80
Thank You for Attending!
Thank You Cargill!

similar documents