have quotas overstayed their welcome? may 10, 2013 hosted by cargill prepared by consulting...
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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?
Consulting | Performance, Reward & TalentProprietary & Confidential | 10/2012 6
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
Quota Achievement100%
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
Quota Achievement100%
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
General Advantages General Disadvantages
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
AdvantagesandDisadvantages
Applicability
• An overall growth goal is identified• The growth rate to historical sales
in the territory“Last Year Plus”
18
General Advantages General Disadvantages
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
AdvantagesandDisadvantages
Applicability
• An “average quota” is established• Adjustments are made based on
territory opportunity
Opportunity Adjustments
19
General Advantages General Disadvantages
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
AdvantagesandDisadvantages
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
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Break
32
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Quota Management Practices Survey Results
33
Survey Demographics
Consulting | Talent & Rewards/Sales Force EffectivenessProprietary & Confidential | 01332031.PPT 0149664 013012
63%
37%
Participant Ownership Structure
Publicly Traded
Privately-Held
34
Survey Demographics
Consulting | Talent & Rewards/Sales Force EffectivenessProprietary & Confidential | 01332031.PPT 0149664 013012
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
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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
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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
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< $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
Consulting | Performance, Reward & TalentProprietary & Confidential | 10/2012 39
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
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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
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< 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
Consulting | Talent & Rewards/Sales Force EffectivenessProprietary & Confidential | 01332031.PPT 0149664 013012
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
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< 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
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58%
11%
31%
Allocation of Individual Sales Contributors’ Quotas
Individual
Team
Combination
Quota Setting Process
44
Quota Setting Process
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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
Consulting | Talent & Rewards/Sales Force EffectivenessProprietary & Confidential | 01332031.PPT 0149664 013012
7%
2%
52%
28%
11%
Quota Time Period
Month
Quarter
Annual
Multiple periods (e.g., quarter and annual)
Other (please specify)
Quota Setting Process
46
Quota Setting Process
Consulting | Talent & Rewards/Sales Force EffectivenessProprietary & Confidential | 01332031.PPT 0149664 013012
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
Within 60 days after the beginning of the performance period
Within 90 days after the beginning of the performance period
47
Quota Setting Process
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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
Quota Setting Process
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Other (please specify)
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
Quota Setting Process
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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
Quota Setting Process
Consulting | Talent & Rewards/Sales Force EffectivenessProprietary & Confidential | 01332031.PPT 0149664 013012
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
Consulting | Talent & Rewards/Sales Force EffectivenessProprietary & Confidential | 01332031.PPT 0149664 013012
65%
35%
Is seasonality applied?
Yes
No
52
Most companies expect the majority of their salespeople to meet or exceed their goals
Consulting | Talent & Rewards/Sales Force EffectivenessProprietary & Confidential | 01332031.PPT 0149664 013012
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
Consulting | Talent & Rewards/Sales Force EffectivenessProprietary & Confidential | 01332031.PPT 0149664 013012
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
Consulting | Talent & Rewards/Sales Force EffectivenessProprietary & Confidential | 01332031.PPT 0149664 013012
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
Consulting | Talent & Rewards/Sales Force EffectivenessProprietary & Confidential | 01332031.PPT 0149664 013012
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
Consulting | Talent & Rewards/Sales Force EffectivenessProprietary & Confidential | 01332031.PPT 0149664 013012
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
Consulting | Talent & Rewards/Sales Force EffectivenessProprietary & Confidential | 01332031.PPT 0149664 013012
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
Consulting | Talent & Rewards/Sales Force EffectivenessProprietary & Confidential | 01332031.PPT 0149664 013012
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
Consulting | Talent & Rewards/Sales Force EffectivenessProprietary & Confidential | 01332031.PPT 0149664 013012
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
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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
Consulting | Talent & Rewards/Sales Force EffectivenessProprietary & Confidential | 01332031.PPT 0149664 013012
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
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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
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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
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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!
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< 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!!
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< 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
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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
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< 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
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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
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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
Consulting | Talent & Rewards/Sales Force EffectivenessProprietary & Confidential | 01332031.PPT 0149664 013012
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
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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
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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
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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
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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 | Performance, Reward & TalentProprietary & Confidential | 10/2012 77
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!
Consulting | Performance, Reward & TalentProprietary & Confidential | 10/2012 79
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
Consulting | Performance, Reward & TalentProprietary & Confidential | 10/2012 80
Group Feedback and Next Steps
Consulting | Performance, Reward & TalentProprietary & Confidential | 10/2012 81
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!