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Five Tips for Building Sales Quotas
Jan 17, 2023
With the start of the new calendar year, many organizations that have completed their annual Incentive Compensation (IC) plan designs are turning their attention to generating fair and equitable sales quotas.
Setting fair and accurate goals continues to be the top-ranked Sales Operations Challenge based on IQVIA’s 2022 IC Benchmark Survey. With that in mind, IQVIA’s IC experts offer five tips to help healthcare organizations develop fair and motivating quotas for their salespeople.
- Upstream Inputs: Quota-setting challenges may be symptomatic of upstream issues. For example, an imbalanced territory alignment causes “outlier” situations that require manual intervention when setting quotas. Other examples include forecast accuracy, data capture, and localized issues of managed care coverage or customer access. If these problems can’t be easily resolved at the source, how can your quota setting process adapt to the challenges or circumvent them?
- Simplicity: Keep the quota-setting method as simple as you can. Consider both the actual fairness and field perception of fairness of your quota-setting method. A very complicated quota-setting method (one with many inputs and calculation steps) may not be perceived as fair by your salespeople. They may put more trust in a simpler method that sacrifices a small amount of mathematical fairness for the advantages of being easy to explain and understand.
- Accuracy and Timeliness: Accuracy is paramount for maintaining field motivation and organizational credibility with respect to sales quotas, but speed of delivery runs a close second. Frequent complaints from salespeople are that they receive their quota “too late to do anything about it,” or that not having a quota “makes it hard to know where I stand.” In our experience, best practice is to release quotas before 25% of a measurement period elapses. For a quarterly quota-setting cycle, strive to have your quotas released no later than the third week.
- Process: Build a robust process for finalizing sales objectives that are not traditional quotas. If your IC plan includes sales objectives such as MBOs, customer evaluations, patient outcomes, or team-based components, consider how they will be set. Who are the stakeholders and approvers to complete them? How will those objectives be delivered to your salespeople?
- Field Review: Based on the IQVIA survey, 65% of companies offer their sales leaders (District/Region/Nation) the opportunity to review and make changes to quotas. The ability to make changes often comes with business rules (e.g., “zero sum” changes within a district, territory level guardrails +/- 10%, etc.) to prevent perceived favoritism. We think this process builds credibility and a sense of ownership on the part of sales leadership. This also enables quotas to better reflect local market conditions. However, it does come with the cost of building additional time into the process.
Could your organization benefit from an independent evaluation of your organization’s quota-setting processes and methods? Please connect with us to discuss how IQVIA could help your organization optimize its quota setting models and associated business processes.
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