- In a recent survey, 42 percent of respondents experienced significant issues after launching a quota and compensation plan
- There are three recommended techniques to mitigate risk when distributing compensation plans and quota
- Share baseline information, growth assumptions and allocation models with sales leadership and quota bearers
Most sales operations leaders have probably been through the painful experience of re-issuing quotas or compensation plans shortly after their initial distribution. If this has happened to you, you aren’t alone! In a recent SiriusDecisions survey, 42 percent of respondents revealed that they experienced significant issues after launching a quota and compensation plan.
While it’s never a pleasant experience to re-issue quotas, compensation plans or both, I found the survey results comforting. Now I know it’s a fairly frequent occurrence. Finishing out the fiscal year, completing the sales plan, writing compensation plans, and a host of other fourth-quarter activities can contribute to calculation errors, plan rewrites and even simple formatting errors. Couple these issues with a revolt from the field that can occur if there are significant changes in plan terms or quotas, and it’s a recipe for problems.
I recommend several techniques to mitigate risk when distributing compensation plans and quota:
- First, establish a quota and compensation plan steering committee that formally signs off on the plan document. The committee should include, minimally, representatives from finance, human resources, key executives or their delegates, the compensation system administrator (you don’t want to distribute a plan with elements the system can’t calculate) and anyone who could derail the delivery of compensation plans or quotas.
- Second, establish a formal signoff process between sales and finance. Prove that quota allocation is sufficient to cover the financial plan, agreed breakage amounts and compensation accrual model requirements.
- Finally, create a process to share the quota-setting methodology with sales leaders and all quota-carrying sales roles. Provide them full access to your work, and help them understand the calculations behind their quotas.
One mantra I’ve repeated over the years is, “You don’t have to like your quota, but you do have to understand how it was calculated.” When you share baseline information, growth assumptions and allocation models, it’s much easier to sell quotas to sales leadership and individual quota bearers. Sharing details also lowers suspicion – and who doesn’t welcome full disclosure, especially when it comes to something as important as individual compensation? It might seem like a lengthy process, but working directly with sales leaders and frontline selling roles in quota setting gives these stakeholders an opportunity to understand what goes into it – and gives you an opportunity to catch errors you might have missed otherwise.