- When it comes to assigning quotas, follow Lao Tzu’s advice: Don’t overdo it, or there will be consequences
- In sales operations, there’s a fine line between managing commission expenses responsibly and making quotas unachievable
- SiriusDecisions research illuminates the benefits and drawbacks for over-assigning quotas
Lao Tzu was an ancient Chinese philosopher most famous for writing, “The journey of a thousand miles begins with a single step,” but there are so many more overlooked pearls of wisdom in his treatise, the Tao Te Ching. One is in his chapter “The Danger of Overweening Success,” where he cautions:
Stretch (a bow) to the very full,
And you will wish you had stopped in time.
Temper a (sword-edge) to its very sharpest,
And the edge will not last long.
When it comes to over-assigning quotas, follow Lao Tzu’s advice: Don’t overdo it, or there will be consequences. SiriusDecisions’ research reveals a point at which over-assignment creates quotas that are simply unachievable. Reps catch on and they flee, with high performers the first to go. Many companies never recover from this type of sales-talent exodus. In sales operations, there’s a fine line between managing commission expenses responsibly and making quotas unachievable, which leads to disaster.
Of course, there are good reasons for reasonable over-assignment:
- For a buffer to absorb commission expense overruns. Like it or not, commissions budgets are fixed. If sales overshoots the budget, the CFO will recoup the expense by reducing sales heads. A few percentage points of over-assignment are usually not noticeable – and they prevent an overrun from happening.
- To provide manager breakage between personal quotas and the sum of their team’s quotas. Managers sometimes like to afford themselves a few points of overage to account for potential attrition and unbalanced team performance. However, be careful with breakage levels – they add up quickly.
- As a driver to encourage sales headcount investment. Corporate boards will sometimes demand excessive quota over-assignments to force executive teams to invest in sales headcount levels that will deliver long-term corporate growth. This approach works when executive teams actually make the necessary tradeoffs and hire the heads needed to absorb the over-assignment. It fails when they simply spread it across existing reps.
However, there are also bad reasons for over-assigning quotas:
- To appease an unrealistic finance model. The sales model might not be grounded in total addressable market data, realistic sales growth assumptions, or the cost of funding a sales organization mapped to meet customer demands along the buyer’s journey. As sales leaders, when you find yourself up against such a model, arm yourself with facts. Don’t exaggerate the possible consequences – factual consequences speak for themselves. Also, don’t make it personal (using statements such as “Bob or Sue will quit”). Finance is not wrong in assuming a sales organization should not be overly dependent on the performance of a couple of reps. The fact is that excessive over-assignment leads to increased attrition.
- To overcompensate for potentially bad quota-setting. Setting quotas is difficult, but it’s not unreasonable for salespeople to expect sales operations to get it right. Don’t shift the risk to them by piling on more quota. A few points of over-assignment are enough, and there are equitable ways of managing expenses when unforeseen circumstances (e.g. bluebirds) occur.
Sales can appear self-serving when fighting quota over-assignment battles. That’s natural. After all, quota assignment affects their personal earnings. For these discussions, it can be helpful to bring SiriusDecisions in to help build a dispassionate factual case based on actual research conducted across thousands of companies.
What are your thoughts?