review of recent study findings quota setting best … · of industries including software,...

Review of Recent Study Findings

October 12, 2011

Presented by

© Copyright 2011 The Sales Management Association.

Quota Setting Best Practices for Sales

Operations

About the Sales Management Association

A global, cross-industry professional association for sales

operations and sales management.

Focused in providing research, case studies, training, peer

networking, and professional development to our membership.

Fostering a community of thought-leaders, service providers,

academics, and practitioners.

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© 2011 The Sales Management Association. All rights reserved.

Learn More: www.salesmanagement.org

OCT

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Join Us for this upcoming SMA event

Slide 2

http://www.salesmanagement.org/

Today’s Presenter

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© 2011 The Sales Management Association . All rights reserved

Ted Briggs

• Has over 20 years of sales effectiveness and sales compensation

experience in working with clients in the technology,

telecommunications, financial services, consumer products,

medical products and pharmaceutical industries

• Led the development of numerous industry sales compensation

and sales operations roundtables and forums nationally

• Served as a business and practice leader in national/global firms

including Alexander Group, Sibson, and Watson Wyatt before

starting Better Sales Comp Consultants

• Previous positions include training and development as well as

CPA for Deloitte

• Certified Meeting Facilitator – Center for Effective Meetings

• An author of WorldatWork publication, Sales Compensation

Essentials, as well as numerous articles and newsletters.

• Member of WorldatWork Sales Compensation Teaching Cadre

• Frequent speaker at national and global conferences on topics

related to sales compensation, sales productivity and sales

performance management

https://www.wrike.com/attachments/298203/photo.JPG

Today’s Presenter

4 Slide 4


Clinton Gott

• Has over 12 years of consulting experience working across a range

of industries including software, hardware, consumer

products/DSD, medical products, and financial services.

• Enjoys a particular emphasis on helping small or medium sized

businesses evolve the sales organization and compensation

program toward greater maturity, effectiveness, and sophistication.

• Formerly served as the Western Region Sales Effectiveness

Practice Leader at Watson Wyatt (now Towers Watson).

• Held human capital and process consulting roles at Sibson

Consulting and Accenture.

• Frequent conference speaker and author — Workspan,

WorldatWork, and other events.

• Earned an MBA with distinction from UCLA Anderson School of

Management.


Today’s Presenter

5 Slide 5


Fred Sass

• Over 20 years of experience in technology companies – AT&T,

ConceptWave Software, Tira Wireless, Casero, Varicent Software

• Responsible for product marketing strategy and execution for the

Varicent Sales Performance Management (SPM) software solution

• MBA from McMaster University


Review of Recent Study Findings

October 12, 2011

Presented by

© Copyright 2011 The Sales Management Association.

Quota Setting Best Practices for Sales

Operations

Webinar Agenda

• Speaker Introduction

• Views on Quota Setting

• Introduction to BSC‟s 2011 Quota Study

• Highlights of Findings and Best Practices Alignment

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Webinar Agenda





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Quota Setting, at Its Essence…

9

Quota Setting = Growth Planning

There is a secondary benefit – setting goals allows a more fair

and motivational sales compensation program.

Goal-based plans = maximize results and drive true and

equitable pay-for-performance results.

Why Using Sales Goals are Important

1. Links an employee’s activities to the corporation’s mission and

financial objectives and results

2. Promotes dialogue between sales management and representatives

about the most effective way to execute the sales and service

strategies

3. A way to set priorities and to define achievement

4. Helps provides focus on the right accounts/segments with highest

sales potential

Sales goals drive company results. They also help ensure an

appropriate calibration of individual expected and superior

performance – with resulting pay implications

10

Good Quota Setting Is A Difficult but Necessary

Discipline

At best…

• Effective performance

management tool

• Basis for differentiation between

high and low performers

• Places sales reps on an level

playing field

• Motivates sustained

performance year after year

• Helps ensure you meet your

overall goals

At worst…

• Manages pay instead of

performance

• Creates misalignment between

real and perceived performance

• Misleads companies into believing

the pay and performance

relationship is sound

• Penalizes high performers by

continually assigning unreasonable

growth expectations

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Characteristics of Effective Quotas

• Fair, equitable and credible

– Fair: The number is achievable with a reasonable degree of effort

– Equitable: The degree of difficulty is consistent across sales reps

– Credible: Salespeople and managers understand basis for quotas and

have some degree of confidence their quota is fair and equitable

• Highly align with overall business requirements

• Motivates sustained performance year-in year-out

• Accounts for differences in territories, market characteristics and sales

potential

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It is critical that the sales organization perceive the quotas as fair,

equitable and credible

―Top 10‖ Key Challenges of Setting Goals

1. Setting realistic goals at an individual territory level

2. Setting goals for shared accounts and crediting individuals on sales by

multiple resources

3. Managing the influence of large, one-time deals or inconsistent

business trends/fluctuations

4. Developing a process that allocates flexible and credible goals

5. Accurately estimating the impact of corporate enhancements,

investments, initiatives, new product introductions and pricing structures

6. Capturing relevant and reliable data

7. Estimating final results before fiscal period ends

8. Getting market comparisons that help evaluate relative performance of

your company and sellers (market/account share)

9. Buy-in at the sales representative level

10. Recognizing there are no ―accurate‖ quotas – as performance is not a

constant

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Webinar Agenda





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BSC 2011 Quota Study – Participating Companies

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• ACI Worldwide • Alcatel-Lucent • Allergan • AMD • Analog Devices • Applied Materials • Atmel • Autodesk, Inc. • Avery Dennison • BMC Software • Broadcom • Canada Post Corporation • Citrix Systems • Commscope • Dimension Data

• Kraft Foods • Kronos Incorporated • LSI Corporation • McAfee, Inc. • Mercuri • NCR • Novell • Nuance • Oakwood • Pfizer Animal Health • Rockwell Automation • San Disk Corporation • Slaud Total Eps • Spansion

The 52 participating companies in BSC’s 2011 General Industry Quota Practices Study:

• Dr Pepper Snapple Group

• EMC • Experian • Frito Lay • Garden View • Ger-Eck, LLC • Great West Life &

Annuity • Hewlett-Packard • Hospira Worldwide • i365 • IBM • Intel Corporation • Juniper Networks

• Stanley Security Solutions

• SuccessFactors • Syngenta • Technology Learning

Group • Tellabs Operations,

Inc. • Teranet • Unisys Corporation • Verigy • Xerox • Zebra Technologies

Corporation

31%

4%

4%

4%

6%

6%

8%

8%

13%

17%

0% 5% 10% 15% 20% 25% 30% 35%

Other

Consumer Products

Hardware

Services

Manufacturing

Semiconductor Equipment/Software/Services

Healthcare

Network/Telecom Equipment/Solutions

Semi-Conductor

Software

Industries Represented

16

62% self-selected having “higher performance” vs. competitors.

Topics Included in This session

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Achievement distributions – targeted and actual

Overall quota setting effectiveness

Factors and data utilized

Tools utilized

Clarity of ownership and level of centralization

Timing – setting and communication

Key practices

Use of quota adjustments

A

B

C

D

E

F

G

H

Webinar Agenda





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Overview – Times are Getting Better… ?

• 62% reported performing ―better than industry‖

• Only 33% responded positively when we asked the same question in

our 2010 sales operations survey

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It would be interesting to ask this question as 2011 winds down.

Macroeconomic exuberance seems to be waning. We expect to see more

struggles than successes over the near term.

Whether overall times are better or not, salespeople

often continue to perform below goal…

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0%

8%

11%12%

23%

12% 12%

10%

8%

4%

0%

5%

10%

15%

20%

25%

<10% 10% to 20% 20% to 30% 30% to 40% 40% to 50% 50% to 60% 60% to 70% 70% to 80% 80% to 90% 90% to 100%

PERCENT OF SALES FORCE REACHING OR EXCEEDING QUOTA IN MOST RECENT FISCAL YEAR

54% had more reps below goal 46% had more reps

above goal

A

… even though companies continue to target more

to be above goal than not

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25%

0%

6%

2%

6%

8%

14%

25%

8%

2%

4%

0%

5%

10%

15%

20%

25%

30%

No Target Set <10% 10% to 20% 20% to 30% 30% to 40% 40% to 50% 50% to 60% 60% to 70% 70% to 80% 80% to 90% 90% to 100%

PERCENT OF SALES FORCE TARGETED TO REACH QUOTA

30% target more reps below goal

70% target more reps above goal

Market Practices:

Different Quota Setting Philosophies

Quota

“Extreme Stretch”

Quotas

Achievable Quotas

“Best Practice”

Symbolic Quotas

<30% Achieve

55% - 70% Achieve

80% + Achieve

Demoralizing Culture of “Winners” Can breed

entitlement; poor CCOS

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Overall, there are favorable perceptions of the

quota-setting process effectiveness

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56% of companies felt their quota-setting process was at least somewhat effective while 25% felt their process was somewhat ineffective or worse.

EFFECTIVENESS OF QUOTA SETTING PROCESS

2%

2%

21%

19%

37%

17%

2%

0% 5% 10% 15% 20% 25% 30% 35% 40%

Very ineffective

Ineffective

Somewhat ineffective

Neither ineffective or effective

Somewhat effective

Effective

Very effective

B

To measure effectiveness, a couple of approaches

had predominant usage

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MEASURING EFFECTIVENESS OF QUOTA SETTING PROCESS

0%

15%

25%

75%

45%

19%

22%

25%

66%

66%

0% 10% 20% 30% 40% 50% 60% 70% 80%

Other

We do not measure the effectiveness

Assessing prevalence of quota corrections/adjustments during

year

Number of people reaching or exceeding goal

Compare comp spend versus budget and results

Higher Performance Co's Med/Avg/Low Performance Co's

• Responses to „Other‟: 'Nearness' by Rep to 100% Attainment, Assessing market share, Driven by National result, Fairness

and equity, Looking at goal versus growth, and Forecast accuracy

Overall, there are also favorable perceptions of quota

accuracy

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73% of companies state they were at least somewhat accurate in setting quotas this year.

ACCURACY IN SETTING QUOTA THIS YEAR

3%

0%

8%

18%

45%

25%

3%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

Very inaccurate

Inaccurate

Somewhat inaccurate

Neutral

Somewhat accurate

Accurate

Very accurate 73% better than “neutral”

11% below “neutral”

Most quota-setting processes still appear to lack

sophistication – yet using multiple approaches helps

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17%

33%

56%

67%

71%

85%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

Other

Algorithm

Field feedback

Account planning sessions

Qualitative based on management experience

Last year plus

FACTORS UTILIZED TO SET QUOTAS

C

10

5

5

5

0 2 4 6 8 10 12

Other

D&B

Gartner

IDC

The survey showed a limited usage of 3rd party

data…

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3rd Party Data. We were surprised to find that only 35% stated they used a 3rd party (e.g., D&B, IDC, Gartner, etc.) when setting quotas.

UTILIZATION OF 3rd PARTY DATA

Responses to „Other‟: Equifax,

Fenalco, Cerulli, Project

Monitor/Project Today, CRN,

OneSource, Puget Sound

Business Journal, IMS, and

Numerous 3rd Party Forecasts

0%

2%

2%

20%

51%

22%

4%

0% 10% 20% 30% 40% 50% 60%

Very unreliable/accurate

Unreliable/inaccurate

Somewhat unreliable/inaccurate

Neither unreliable/inaccurate or reliable/accurate

Somewhat reliable/accurate

Reliable/accurate

Very reliable/accurate

… but in general, the accuracy and reliability of data

being used was more positive than negative

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77% of respondents cited data as being at least somewhat reliable/accurate to very reliable/accurate.

ACCURACY AND RELIABILITY OF DATA

77% positive

Only 4% negative

And companies are using the ―same old‖ tools…

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2%

2%

2%

4%

4%

18%

18%

22%

24%

76%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

Consulting firm software solution

Salesforce.com

Salient application

SPM/EIM solution

Workflow management solution

Access or similar application

Module within another internal application

Business Intelligence/Analytics tool

Internally developed planning application

Excel or similar tool

TOOLS UTILIZED FOR QUOTA SETTING

In terms of “effectiveness”, Excel and internally developed tools stand out

D

3%

11%

22%

22%

24%

24%

32%

38%

0% 5% 10% 15% 20% 25% 30% 35% 40%

Access or similar application

Module within another internal application

Excel or similar tool

Internally developed planning application

Other

Workflow management solution

SPM/EIM solution

Business Intelligence/Analytics tool

… while looking for a better solution

30

71% of companies plan to make changes or upgrades to the tools they currently use.

PLANNED CHANGES/UPGRADES TO TOOLS

Quota Requirements for SPM Technology

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Plan by individuals, teams, regions, channels, products

Top down & bottom up

Management reporting on quota attainment

Sales staff, management, channel partners

Visibility

Electronic distribution and approval

For “what if Analysis” – Integration with past period data

Integration Planning

Territory fairness

Requirements at a Recent Deployment

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Territory Optimization

Balance territories based on opportunity, workload, account information and geography

Ensure that reps are motivated with fair quotas and equitable territories

33

Scenario Modeling

34

Quota Management

35

Management Reporting

Pay For Performance Analysis Quota Distribution

36

Clarity of ownership is important – most identified

ownership within a sales-related group

37

13%

6%

8%

10%

12%

13%

38%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45%

Other

Reporting to another functional area

Reporting to Finance

Reporting to Sales

Reporting to Sales Finance

No, but there is a sales planning team

Reporting to Sales Operations

73% of respondents stated quota process owner reports to sales, sales planning, sales ops or sales finance.

QUOTA PROCESS OWNERSHIP

E

A ―balanced‖ approach or a bias toward more

centralization was found in the preferred process

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Overall, companies tended to favor a balance between centralization and decentralization – and clearly more centralization than decentralization

46%

38%

10%

2% 2% 2% Balance between centralization and decentralization

More centralization than decentralization

More decentralization than centralization

Complete decentralization

Global process, BU ownership to execute within common process

Process/Broader expectations. Should be centralised and #s finalised; how they arrive at is decentralised

56% of high performers sought a globally consistent approach vs. only

37% of average/lower performers

Quota process timing results were not surprising –

early start…

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10%

13%

25%

17%

15%

15%

4%

0% 5% 10% 15% 20% 25% 30%

After fiscal year start

<1 month prior to fiscal year start

2 months prior to fiscal year start




>6 months prior to fiscal year start

Most companies (76%) begin the quota setting process at least two months prior to the beginning of the fiscal year.

INCEPTION OF QUOTA SETTING PROCESS

F

… that typically requires several months to complete

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51% of companies spend two to three months (from start to finish) on their quota setting process.

6%

10%

29%

22%

18%

16%

0% 5% 10% 15% 20% 25% 30% 35%

2 to 4 weeks

1 months

2 months

3 months

4 months

5 months

DURATION OF QUOTA SETTING PROCESS

In terms of communication, companies aligned well

to best practice, first as to ―when‖ to communicate…

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8%

29%

40%

8%

12%

4%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45%

>8 weeks after fiscal year start

5 - 8 weeks after fiscal year start

2 - 4 weeks after fiscal year start

<2 weeks after fiscal year start

<1 month before fiscal year start

>1 month before fiscal year start

48% of companies communicate new quotas to field within the first four weeks of the fiscal year, while 37% communicate later…

48% do so within first four weeks of FY

16% do so before new FY (?)

8% do so 8+ weeks after FY start

There is a “too early” and a “too late” for communicating quotas. Ideally,

“just right” equals within first month but only with “high confidence”.

TIMING OF QUOTA COMMUNICATION

… and also in regard to quota communication

versus plan communication

42

For those looking to make changes to communication, the top three focus

areas were increased tool usage (40%), improved timeliness (25%), and

improved training (25%)

6%

10%

27%

58%

0% 10% 20% 30% 40% 50% 60% 70%

Yes, infrequently

No

Yes, sometimes

Yes

… while 85% communicate new comp plan information (e.g., measures, weightings, mechanics, etc.) before having quotas

OCCURRENCE TO COMMUNICATE PLANS BEFORE QUOTAS

Good Alignment to Four Important Practices

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4%

6%

21%

19%

50%

0% 10% 20% 30% 40% 50% 60%

Other

Yes (10% to 15%)

Yes (5% to 10%)

Yes (0% to 5%)

No

Practice 1. Minimal use of quota over-allocations.

OVER-ALLOCATION (DIRECT REPORT TO 1st LINE MANAGER)

Only half over-allocate. When done, most do less than 10%

Excessive over-allocation can be dangerous to morale and culture.

G

Practice 2. Strong preference to allocate quotas at the individual opportunity level.

2%

2%

2%

2%

17%

75%

0% 10% 20% 30% 40% 50% 60% 70% 80%

First territory then ROI minimum

Individual and customer and/or team

Mix of both above

Utilize both

Role based

Individual Opportunity (territory/account) based

Good Alignment to Four Important Practices cont

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QUOTA SETTING METHODOLOGY

True “opportunity-based” quotas are a clear best practice. Role-based can

work effectively when opportunities are relatively equal.

4 times as many use individual opportunity versus role-based goals

0%

0%

6%

4%

50%

23%

17%

0% 10% 20% 30% 40% 50% 60%

0% top down/100% bottom up








45

TOP DOWN VERSUS BOTTOM UP

Practice 3. Some balance of top-down and bottom-up quota setting.

Reality check: top-down triumphs but hopefully bottom-up opportunity is

considered

60% factor in bottom-up analysis as a 25%+ factor

2%2%2%2%2%

4%12%

13%33%

81%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

Annual with quarterly seasonalityDaily

Multi-yearQtrly bonuses

KPIs vary (monthly, some quarterly, etc.)weekly

MonthlySemi-annually

QuarterlyAnnually


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DISCRETE MEASUREMENT PERIOD

Practice 4. “Appropriate” measurement period = annual.

While the recent economic uncertainty led some to consider shortened

goal periods, annual still dominates as a market and best practice.

Meanwhile, quota adjustments are avoided, even in

the current economy

47

10%

10%

80%

6%

9%

84%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

We make quota adjustments frequently

We never make quota adjustments

We rarely make quota adjustments

Higher Performance Co's Med/Avg/Low Performance Co's

TYPICAL PRACTICES AROUND QUOTA ADJUSTMENTS

Companies, in general, claimed to rarely make quota adjustments…

60% claimed the current economy has had little impact on adjustments.

H

When used, quota adjustments usually do not

impact a large number of quotas

48

6%

2%

0%

2%

4%

4%

0%

14%

10%

58%

0% 10% 20% 30% 40% 50% 60% 70%

91% to 100%

81% to 90%

71% to 80%

61% to 70%

51% to 60%

41% to 50%

31% to 40%

21% to 30%

10% to 20%

<10%

When used, most adjust less than 10% of quotas, typically stemming from changes to coverage model (59%), disruptive changes to market (59%), and errors in quota setting (41%).

PERCENT OF QUOTAS ADJUSTED – MOST POPULATED DIRECT SALES ROLE

58% adjust fewer than 10% of quotas

A surprising 8% adjusted more than 80% of quotas

Conclusion

• Effective quota setting continues to be the backbone of success in

both growth planning and impactful sales compensation programs

• Quota setting is an area prime for continuous improvement

– There is no ―end game‖ in your quota setting process – but there is

continual improvement and increased confidence over time

• The future should include:

– Improved tools

– More sophisticated modeling and calculations

– Greater rigor

• But as quotas are a prediction of the future, and confounding variables

were always arise, the main goals should be reasoned quotas, well-

communicated processes, and ideals of truly ―fair‖ targets

• Having the right process is essential – communicating that process to

the field is a smart strategy – avoid the ―black box‖ complaints

49

Ted Briggs Principal Phone: (310) 245-4686 Email: [email protected]

Fred Sass Director, Product Marketing Phone: (416) 987-0130 Email: [email protected]

Clinton Gott Principal Phone: (310) 968-3408 Email: [email protected]

www.bettersalescomp.com www.varicent.com

Questions and Contact Information

50

http://www.varicent.com/

http://www.bettersalescomp.com/

http://www.varicent.com/

About Better Sales Comp Consultants

• Create better sales compensation programs and sales effectiveness programs

• Having held leadership roles within national and global firms, BSC consultants

offer large-firm capability with small-firm flexibility and cost-effectiveness

• Feature senior level delivery, collaboration, and partnership with our clients

• Industry experience includes high tech, consumer products, medical devices,

pharmaceuticals, financial services, retail and other verticals

52

Ted Briggs Clinton Gott Features over 70 years of

combined industry

experience, with team

members:

• Per Torgersen

• Datta Davé

• Larry Novacich

BSC Consultants

Detailed biographies at www.bettersalescomp.com

About Varicent

53

A global software company focused on variable compensation programs

#1 fastest growing Software Company on Deloitte Fast 500 for all of North America

Sales Performance Management

Fred Sass, Director of Product Marketing

• Over 20 years of experience in technology companies – AT&T, ConceptWave Software, Tira Wireless, Casero, Varicent Software

• Responsible for product marketing strategy and execution for the Varicent Sales Performance Management (SPM) software solution

• MBA from McMaster University

review of recent study findings quota setting best … · of industries including software,...

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