New 2013 Sales Quota = HR Get Ready!
Sales teams are getting their 2013 numbers. If historical performance was used to set the new quotas, expect status quo. For the Sales Leaders who learned how to set quotas at the SBI Make the Number tour (register now!), the results will be quite different. 2013 results will uncover some long-hidden flaws in the sales force.
This blog is NOT about how to correctly set your sales quotas. It's about the fallout that happens when the quotas are right. Yes, that's right - correct quotas can cause fallout! One example: HR will be needed to help deal with the newly found C players. This is known as Talent Management.
A client of ours has a sales division that has easily made their quota year after year. Every year they get a 2-3% higher target. Every year they meet it easily. Their quota performance looked something like this:
The vast majority of Reps beat their numbers – the "average" sales rep acheived 150% of their annual quota. This performance chart masks underlying problems that their easy targets fostered including:
- B and C players look good because they made their numbers.
- Overpayment of commissions – target was hit, but how much more revenue could have been gained for the same amount of commissions?
- Average Selling Price was not part of the target, so lots of easy, low-margin deals made up the quota.
- Low quotas caused Reps to stay within their comfort accounts – renewals and incremental deals at existing customers. Why risk new logos?
- Structure problems - field Reps were overpaid for work that should be done by lower-cost resources (aka Inside Sales).
This year, the CSO learned effective quota setting from SBI, which should look like this:
Next year, it will be much easier to spot C players based upon accurate statistics. HR needs to prepare now to proactively help Sales hit the higher number. Sales recognized that Quota setting was a problem. Now HR can help Sales recognize the underlying issues that will surface.
What's the first step for the HR leader? Go meet with Sales leadership and plan how to monitor for issues. Determine when actions will be triggered. For example, metrics must be in place to monitor Rep performance to the new quota. If a Rep is ranking in the C player category at quarter-end, what actions should take place?
Second step? Draft effective communications to the Sales force from Sales Leadership. Tell the Reps why the quota changed and what they can expect.
The third step is to execute on the monitoring & communication plan. Then, whether at quarter end, year end, or halfway in between, these are the actions to take when a C player surfaces:
1. Talent allocation
Determine if they truly are a C player by quota ranking and also looking at:
- Historical performance trends
- Their competency rankings
- Their observed attitudes/behaviors regarding self-improvement, best practice adoption, process adherence, etc.
If confirmed as a C player, work with Sales to move them to somewhere else. Do this at the agreed-upon trigger time, but the earlier the better. HR should already have helped Sales build a bench of candidate reps. Now it’s time now to activate one as a replacement.
2. Individual Development Planning
Provide teachable C players with an Individual Development Plan (IDP). The IDP has short-term improvement assignments designed to move the C player to a B category. If the C player accomplishes all ‘assignments’ on a strict schedule, move them up. Otherwise, see #1. The key here is no leniency.
For help with this, SBI has a robust set of Career Action Planning (CAP) activities useable as assignments. To see some assignments from this CAP library, register for our Make the Number tour.
Consider changing the sales compensation plan to penalize C player rankings. On the other hand, build in bonuses for a Rep that significantly improves from C to B or A ranking. Tie small percentages of the overall compensation to achievement of IDPs and Competency improvements.
Carefully consider leveraging the C players for testing something new – something your A and B players may not have risk appetite for. It could be a way for a C player to 'redeem' themselves.
In general, the Compensation Plan needs to drive Reps to A player behaviors. For C players that cannot attain A behaviors, see #1.
4. Sales coaching
Guide the Sales Managers on how to effectively coach C players. For one thing, coaching of C players should NOT be more than 10% of a Sales Manager’s time. What's the best approach? Use CAP assignments that can be done without the SM’s time involvement. For instance:
- Return the Rep to any onboarding program to ensure mastery of the basics. Well-designed onboarding programs use self-serve education modules.
- Assign books in the Sales best practice realm for reading and report out.
- Have the Rep do research on a topic they struggle with and report back to you what best practices they learned. Have them train the rest of your team on this topic.
- Give the Rep a list of sales effectiveness blogs (like this one). Then, have them report on what they learned.
Note that SBI recommends not working with C players, but moving them out as quickly as possible. Especially in larger firms, this is not so easy. Hence the advice above in numbers 2-4.
Call To Action
New quota setting often reveals C players that have been hiding. HR can help by identifying the C players and guiding SMs to the right responses.
If you are an HR leader, your most direct path to the CEO’s table is through Sales. Attending the SBI Make the Number tour gives you a crash course in how to help sales through best practice Sales Force Effectiveness. You’ll get an excerpt of CAP library items and multiple other tools that you can use to help Sales make 2013 one of the best years yet. Register here.
Author: Steve Loftness
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