Does Quota Even Matter?
Several years ago, in my last position as a major account executive, my brand new first-line sales manager asked me to sit down with him so he could give me my new quota for the year. I told him that I did not care what quota number he assigned to me and that the quota assignment would not impact my performance. I thought his head would explode.
What I told that new manager was 100% true. The only thing that quota meant to me was it gated when my commission rate would go from 4% to 6% to 8 % to 10%. Other than that, the quota assignment was just an arbitrary number that came from HQ. He was incredulous. “We are sales guys”, he exclaimed, “We live and die by quota performance!”
We live by commission check.
So I walked with him to his office and drew a turtle chart on the wall. The company, I explained, is counting on the top 20% of the reps to produce the most revenue and make or exceed their quota assignments. That 20% will also make the most money. The thought was that some reps would attain the quota numbers, about half would be somewhere between 60% and 90% attainment, and the rest would be below 60%.
I admit that I was cheating here. I had seen the chart on the VP of Sales Operations whiteboard a few weeks before. The quota assignment exercise then became a simple algebraic model to distribute revenue assignment plus over assignment such that a bell-curved performance result would have the company making its revenue goals with about 25% of the sales reps achieving quota and hitting their performance bonuses. This controls for both the cost of bonus commission exposure and the attainment of revenue plan exposure.
So, I concluded, it does not matter to me what assignment number you give me. All that matters is that I know I will be in the top 20% and the question becomes how will I optimize my earnings. “OK, Get out of here.” was his reply.
I took two lessons from that exchange which has stuck with me. The first is that it is a waste of time for the manager to worry about the guys in the top 20%. The second is that quota is a useful tool for understanding relative performance.
David Brock wrote a very thoughtful blog post about Does Quota Matter last year for Partners in Excellence. I agree with his conclusion that the point of Quota is to maximize performance and Quota is one way to measure if we are meeting our performance goals. David also references an amazing piece of research undertaken by CSO Insights. Their annual Sales Enablement Study for 2019 stated that among the firms they surveyed, the average revenue attainment was over 100% of plan while the average quota attainment of the sales teams was around 61%. I find that shocking.
Part of what shocks me is that we accept that pattern as acceptable. Sales leaders I speak with, and most of my customers and prospects are sales leaders, tell me that one of their three most pressing issues is how to get the 70% of the reps in the middle to improve their performance. The sales leader who can grow the performance of those reps in the middle of the bell curve breaks the bank. The company posts more bookings and the reps make more money. Everyone is happy. If you go back to the bell-curve chart, it is clear that the top 20% are carrying the freight. How do we extend that performance?
The answer I read frequently is that the correct course of action is to identify the best rep and have everyone else emulate that rep. I disagree. I believe that no two reps, like no two opportunities, are created equal. Different reps have different skills. The key is to understand what are the skills and needs of each rep and how do we optimize each rep’s performance.
That is not easy. It is a challenge for which few sales leaders are trained and for which there are few tools in the market. Most AI for Sales tools are focused on activities rather than behaviors. One of the great beauties of the Challenger Sales system is that it teaches best practices and processes while allowing room for individual skills. Understand and coach each individual and the performance of the team will rise.
This article was written by Joe Lupton, Cien’s Head of Sales and Customer Success.
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