Companies face numerous hurdles when it comes to sales quotas, with one of the most significant being quotas that constantly adjust. These changes can lead to frustration, demotivation, decreased sales performance, and even customer churn. However, with the right strategies in place, it’s possible to overcome this challenge.

Causes

Let’s start by exploring common causes for this situation. Rep churn is the most typical and, in today’s turbulent economic climate, companies are experiencing a lot of it. The rapid growth of the customer base through acquisitions creates the need to consistently add or rebalance workloads. Although less common, internal chaos such as a series of CRO or CEO replacements and constantly shifting sales strategies can cause a disorderly transfer of accounts.

The Impact on Sales Teams and Business

Constant quota changes can have adverse effects on sales teams. Reps may find it hard to adapt, with the lack of clarity making it difficult to prioritize efforts and make informed decisions – affecting their overall performance. It can also cause ambiguity and impede communication between reps and management.

There is also a negative ripple effect on the overall business, with the worst being confused customers leading to dissatisfaction and potential churn. Additionally, constant fluctuations in compensation disrupt financial planning and forecasting. It also usually requires shifting of territory assignments, which adds instability.

Effective Strategies to Overcome the Challenge

To overcome this challenge, organizations can implement the following strategies:

Isolate the Pain

Addressing specific types of accounts presents an opportunity. I worked with a company that had a stream of new clients and a lot of rep churn – a perfect storm. Top accounts didn’t change hands; only small accounts did. By designing the plan around accounts shuffling, we were able to isolate the pain. The plan had two measures. The first was for large accounts, with a stable quota, high incentive weighting, and high over-quota acceleration. The second was for small accounts, with a volatile quota and low over-quota acceleration (the company mitigated risk this way). This measure didn’t have a minimum performance level. It will only work if the accounts being transferred are small.

Pad the Quotas

Another approach is padding the quotas through over-allocation. For instance, if the sales goal for 10 reps is $10 million, and each rep normally receives a $1 million quota, assign them a quota of $1.2 million. This results in a cumulative roll-up of $12 million for the 10 reps. So, if accounts ever require re-assignment, there is no need to adjust the quotas.

A Sinking Fund

For this, a two-fold approach is implemented to the compensation plan, including an annual and a monthly or quarterly measure. The annual measure holds significant weight in terms of assessment and compensation allocation, with the overall quota to be achieved by the year’s end. Throughout the year, the monthly or quarterly results are added together, indicating progress toward meeting the annual quota. This approach ensures that a minimum level of performance (typically set at 80%) must be reached to receive compensation. Going above this allows for increased payouts. As for the monthly measure, compensation is provided on a flat basis. This approach is best for upsell and cross-sell teams.

Babysitting

This temporary arrangement assigns a rep to watch accounts until a new rep is hired, and it usually includes a higher earnings potential. However, this approach is effective only when the period is short-term. I had a customer take this approach but for extended periods. The babysitters became reliant on the additional earnings and resisted offloading the accounts. Client churn increased as a result of the overburdened rep, and the company faced difficulties hiring new reps and providing territories. What a mess.

It’s important to note that the methods outlined are just stopgaps for a larger underlying problem. To address this issue at the source, focus on reining in the negative impacts of account transfers and addressing the underlying causes of rep churn and demand volatility. In the meantime, happy hunting!