Organizations with large sales teams will utilize quotas as a way of giving their reps tangible goals to work towards. Sales quotas help ensure that reps are meeting the minimum expectations from the company, while serving as an additional motivator driving reps to work beyond quotas to unlock extra earnings.
With company revenue goals top of mind when setting sales quotas, other factors that determine sales quotas include a mix of historical performance data, current pipeline trends, territory potential, and sales capacity. Combined together, this data will give you a fairly reasonable prediction into the potential of your sales team, and thus, what to set your quotas at.
However, as with many aspects of business operations, sales operations can be a moving target and that can mean that sometimes the actual outcomes may not match what your initial goals were.
Whether it’s due to unexpected market shifts, new territories, or changes in product offerings, even the most carefully planned quotas may need to be adjusted and waiting to make changes may not be an option. Mid-year quota adjustments can be necessary in some situations to maintain fairness and motivation within your sales team.
How Do You Know When a Sales Quota Isn’t Working?
If you are paying close attention to your sales performance metrics, you’ll start to pick up on signs that your sales team is struggling to meet your goals. The biggest red flags to look for in a sales quota that isn’t working are:
- Underperformance across the board: If more than just a few of your sales reps are underperforming, particularly your historically high performing sales reps, it is extremely likely that unrealistic quotas are the culprit. You may have a handful of reps that consistently miss quotas, but if you are starting to see trends of a greater number of reps missing the mark, it’s time to re-evaluate your quotas.
- Frustrated Sales Reps: This ties in closely to underperformance, but if you are starting to notice a growing attitude shift in reps expressing negativity or frustration with established goals, it could be related to the quotas you have set. Nothing will frustrate or demotivate your team more than having unrealistic expectations to work towards, especially when those expectations are directly tied to their compensation.
- Market or Product Changes: When launching a new product, or if one of your existing products undergoes a significant pricing increase, these changes can impact your sales in unpredictable ways. Variables like these are outside of your sales reps’ control, so these scenarios need to be monitored closely to ensure that you are giving your sales team extra grace to navigate those challenges. This in turn may mean adjusting your sales quota.
- Territory imbalances: Not all territories are equal, so it is unfair to establish the same quota for sales teams in different territories, even if they are all focused on the same product. Similar to underperformance among sales reps, if you continually see certain territories that are not able to meet outlined goals, it’s likely an issue with the goals themselves. Take extra time to review historical sales data for each region to customize quotas based on demographic data and what the sales in that territory actually look like.
Setting New Quotas
If you’ve determined that an adjustment to your quota structure is necessary, here’s how to implement the changes effectively:
Define the Scope of the Adjustment
Why are you making adjustments to your quota? Understanding the “why”, or the impetus for the change, will help you clearly define what needs to be adjusted in your quotas. Was it due to underperformance for a certain sales territory or for a few individual sales reps? Maybe some of your sales quotas are working, while others are not. You will need to look into exactly what is causing the problem in order to come up with an effective solution.
Recalculate Quotas
Back to square one! While you likely consulted various sales data points when first setting your quotas, you now have new information to factor in. So, you may not be starting exactly at square one, but you will be forced to go back and re-evaluate your sales data to be sure to include additional context into the mix that your original forecasts may have been missing. This new information will help you create targets that are realistic, while still being closely tied to your company’s overall goals.
Communicate with Your Sales Team
We’ll talk about this in more detail below, but once you have developed a new structure for your sales quota, you’ll want to communicate the details of these changes to your employees. In most situations, adjustments to your sales quota will be met with relief and appreciation from your sales team, but they still need to be fully informed of what the changes are and what to expect from the new quota calculations.
Update Your Commission System
After clearly communicating changes to your sales team, it’s time to update your quotas in your commission management platform. When making these updates, it’s important to remember these key details:
- Be sure to include effective dates for your new quotas and end dates for your old quotas. This will help ensure that your new quotas are applied to the correct sales periods.
- If your quotas are tied into other rules such as commission rates, accelerators, or bonus thresholds, make sure that these are also adjusted to reflect the new quotas.
Before running the final commission cycle, run a test cycle to verify that your new quotas are set up correctly and that your payments are being processed accurately.
Document Everything
As with anything related to your employee’s compensation, it’s important to maintain a clear record of any and all changes. This is not only useful for potential disputes or confusion among your sales reps, but also if you need to communicate when and why changes were made to senior leadership. If they have questions about why you reduced your sales quotas during a push to increase sales volume, you’ll want to be able to reference the documentation surrounding the change.
Communicating Quota Changes to Your Sales Team
We touched on this briefly above, but your sales team will need to know exactly what changes are being made to their incentive structure. Mid-cycle changes to your sales quotas will affect your employees and their pay, so you need to be upfront and transparent about them.
Here are some tips for how to effectively communicate with your sales team:
Share the Why: Your reps will wonder what sparked the change to their sales quota, so explain the rationale behind the changes. Whether it’s a reaction to external market conditions, internal changes, or perhaps you are acting on concerns raised by your sales reps, make the case for why the adjustments were necessary.
Clarify How it Impacts Earnings: Your reps may be curious about the why, but what they are most concerned with is how these changes will impact their paycheck. So, spell it out for them – show them exactly how their incentive compensation structure will be affected going forward.
Keep the Lines of Communication Open: Even after carefully discussing the effects of the changes to your sales team, they may not truly understand how it impacts them until they receive their first paycheck with the adjusted sales quota. With this in mind, give your rep’s grace the first cycle and encourage them to ask questions if they have any. Likewise, your reps should be empowered to speak up if they continue to see concerns with their sales quotas.
Mid-year quota adjustments aren’t ideal, but they are sometimes necessary and can ultimately be a good thing. Impractical or unattainable goals work for nobody; you’re setting your sales team up for failure while giving your leadership teams unrealistic expectations that will never be met. By thoughtfully reconsidering your quotas, you can maintain trust with your employees, increase motivation, and improve overall plan fairness.
When making changes to your quotas, Core’s rule versioning feature allows you to update your rules easily while maintaining proper linkage to reports and other output. With each version of your quota rule, you are able to process periods accurately without worrying about reverting back to the previous versions. You are also able to maintain a history of changes over time for future reference.
Schedule a demo to see how Core’s flexible rules engine can make changes to your quota rules quick and painless.