One of the first thing reps ask about a new sales compensation plan is “What’s my quota?”

“Quotas are successful because when people set goals, most basically, they want to meet them,” said Chad Albrecht, a leader at ZS Associates’ sales compensation practice.

But far too many companies spend far too little time on this important motivational piece of their sales compensation plan.

Over nearly 14 years, Albrecht has seen what a common problem the neglected quota is.

“A lot of businesses throw up their hands and give everyone the same percent increase,” Albrecht told Xactly.

That’s potentially costly. Without fair and accurate quotas, your sales compensation plan may drive away your best reps or can unnecessarily increase your cost of sales.

Many companies fail to give quotas more attention because they lack data about their territories or aren’t sure what to do with information they do have. Sales forecasts – the second variable in the quota equation – can also be off in a way that is crushing to sales teams.

So, what does a good quota system take into account?

• An achievable sales forecast: Without it, no one has a chance to win.
• An understanding of each territory’s potential: Reps should be rewarded for their efforts, not the quality of the area in which they sell. Can’t get competitive data on your territories? Try surrogates such as census data or Dun and Bradstreet data.
• Manager control: Give sales managers the authority to adjust quotas after they are set. This helps control for problems and earns quota buy-in from your sales leaders.

Once your new quota system is in place, conduct monthly check-ups.

Look at your sales data. What percentage of your sales team is on target? Is the combined revenue tracking near forecast?

“If no one is above 80 percent of their quota, clearly it’s not the people,” Albrecht said. “It’s the quota.”

If you do find problems in your monthly quota audits, there are solutions.

Some companies will slightly over allocate quota so they can adjust if need be. (Many companies did this for sales people with territories in the Gulf Coast after Hurricane Katrina devastated that region.)

If quotas are too high, companies may make across the board downward adjustments.

Finally, allowing managers leeway to adjust quotas helps reduce conflict about your sales compensation system.

In the end, paying attention to setting fair and accurate quotas can motivate your team and help you meet your goals. All you need to set the system up, test it and fix problems is good data.