The Main Rules Of Quota Setting

Quota, or target, setting is one of the three main elements of a motivation scheme (alongside terms and conditions, and territory allocation.)

If one of these elements fails, the whole plan is likely to fail. For example, if a commission system pays generous commissions, but the quotas are too high or not achievable, the sales staff will not be properly motivated. An effective scheme is one in which all three elements are in harmony.

In this article we will focus on quotas and how best to set them for maximum success. 

Who Is Responsible For Setting Quotas?

Assigning quotas is a skilled task that requires time, careful thought, research, and experience. Quota setting requires both a qualitative and quantitative approach.

The overall responsibility of allocating quotas lies with the sales management team, who must work closely with the incentives design team.

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The Position Of Key Sales Objectives In An Incentives Scheme

Anyone who manages a sales team knows that sales activity must mirror the overall strategy of the company. The point of sales activity is to help the company reach its goals – and the clearer those goals, the easier it is to build a strategy that works.

Key Sales Objectives (KSO) are related to the overall goal of the company, but they are shorter and often more challenging in nature. If you use them correctly, KSO can guide your team in the correct direction.

What Is A Key Sales Objective?

A KSO is a goal that is separate from the sales team’s main long-term targets. They are current key management objectives that are short-term, and there is not usually a target attached to them.

KSO are fully quantifiable so management can assess sales people’s performance against the current KSO.

How Is A KSO Different From A Main Target?

As we have seen, KSO are different in that they are shorter term than main targets. However, just like bigger targets, KSO can be:

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Factsheet; Setting The Right Level of The Target Cash Compensation

When you hire a sales person you need to do your maths before; that means deciding how much you are going to offer to this person. And when we talk about offering, we mainly refer to the level of the OTE (on target earnings) the sales person will pocket in a year. This is the sum of the fixed salary and the variable part (as for example commissions) the sales person will get.

It is called on target earnings because the variable part will be granted in full only if the goals are met, whatever these are! The total target cash compensation, in many publications seen as TTCC is always in cash.

The target cash compensation is different for each sales role (its range differs per role) and sometimes per sales person. The question though is how one decides how much to give to a sales person in TTCC? And which are the factors to decide that level?

There are various scenarios and methodologies to use depicted in the below factsheet. Reach out to us to discuss a methodology that fits your company.

Infographic; Performance Measures In Compensation Plans – How To Weight Them Effectively

It comes the time when designing a sales compensation plan one needs to decide which performance measures to use and the weight they will curry in the program.

Performance measures are those KPIs a sales person is judged and measured upon and consequently incentives are paid for. Deciding the measures to use needs some thinking with the first rule being that these measures shall reflect the goals of the sales team.

As long as there is more than one measures used in the program, one needs to think about the significance each of them will have in the system.

The below inforgraphic gives some insights to help sales management choosing wisely the weight between the measures.