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May 25, 2011
Sales Comp Sticky Wicket #1=Quotas

Special from WorldatWork San Diego
“I get lots of questions on sales compensation,” says consultant David Cichelli, “but the number one sticky wicket is always quotas.

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Cichelli, who is Sr. Vice President at The Alexander Group, offered his tips at WorldatWork’s annual conference and exhibition going on this week in San Diego. Here are his tips for understanding and fixing quota problems for sales people.

Sticky Wicket #1—Sales Compensation Quotas

The problem: Quality/accuracy of quotas is low

Sales Comp Impact: Payouts do not reflect relative contributions

Source of the Problem:

  • Irregular business cycles
  • Poor forecasting (usually from finance or product managers)
  • Weak quota allocation
  • Governance issues, particularly—rampant quota adjustments

Upstream Solutions:

  • Business Cycles: Shorten quota periods to semi-annual or quarterly
  • Forecasting: Invest in forecasting tools and modeling
  • Quota Allocation: Redesign quota allocation process
  • Visibility: Remove “uncertain events” from annual quotas (e.g., new products, mega sales)
  • Governance: Restrict/review quota changes

Sales Comp Solution:

Issue quota Policies, e.g.,:

  • Quotas cannot be over/under assigned by more than 5%
  • After Q2, if 80% are above quota, reset quotas after payouts
  • After Q2, if only 40% have reached quota, reset after payouts
  • All quota relief must be absorbed by others (you’ll be surprised how fast this one curbs quota relief, says Cechelli)

Managers Need Your Help

“When you ask your managers about quotas and other compensation issues, they will always say, ‘We’ve got this totally under control.’ Just ask them to see the plan,” says Cichelli. “You’ll get ‘Ah, it’s under revision’ or ‘We can’t find it right now.’” Bottom line, the managers need your help. Be proactive and give them a hand before things are set in stone and the plan won’t work.

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