We've shared our best practices in quota setting before:
- Use quality data as input
- Set individual quotas based on the territory opportunity
- Top down & Bottom up; your strategy should be interactive with your sales reps
- Report and analyze performance and opportunity on a continuous basis
But what about quota frequency? Is a shorter frequency or longer frequency such as annual quota better when it comes to quota achievement? The Harvard Business School recently posted an article exploring what kind of quota is most motivating for sales reps. The beginning of the article poses the question, “Could sales force performance be kick-started if that quota incentive was delivered more frequently?” The article details the study findings; lower performers actually do better when given a shorter quota period. How short? The article talks about daily quotas for the retail industry. Now, this may or may not work for your business model, but the key idea is that over longer quota periods, an individual may come to the realization they cannot hit their goal, and their performance drops. These findings are contradictory to research in the field of goal-setting: “If individuals or teams find that their current performance is not achieving desired goals, they typically become motivated to increase effort, or change their strategy,” (Locke & Latham, 2006). Regardless if you agree with the quota frequency study or not, one lesson remains: An organization’s quota structure should be directly connected to its sales strategy.
How can I apply the findings to drive sales performance?
As you consider changes to your quota frequency, make sure you are addressing the sales psychology that underlies the findings. The Harvard study is in line with what I’ve seen in my consulting experience in the real-world. This study confirms something I've advocated for years; A sales rep will either believe that they can make a quota (or not) on day one, and perform accordingly. Part of this action is based on the idea of self-fulfilling beliefs by the American psychologist William James. Xactly has written on quota setting best practices before. Of the reps that believe they can make quota, their level of self-efficacy will wax or wane during the quota period due to 3 things:
- Self-Mastery Self-mastery or personal success at attaining part of their quota is a key to self-efficacy. If they are unable to build pipeline, progress deals, or close business during the quota period, self-efficacy will decline. Low self-efficacy equals low performance.In the sales world, the front-line sales manager and sales enablement teams play a critical role in developing a rep’s confidence, and therefore, their motivation to sell. Sales leaders need to make sure they have the right tools, skills, and knowledge to be able to sell. If they have early success, it can easily snowball into a high-level of self-efficacy.In the sports world, this can be equated to when a quarterback is given a series of short pass plays to build confidence. In the sales world, praise (not pay!) early successes in the quota period. For example, locking down a key meeting, scheduling a demo, and of course, closing business of any size.
- Role modeling In sales, role modeling happens when a rep sees a peer succeeding at the task. The “a-ha” moment clicks; It can be done! Ideally, the next step is for that role model (typically an A-player) to share how they did it with their peers.Peer to peer learning and feedback is an incredibly powerful mechanism to boosting sales performance. In sales, there many ways to take advantage of role modeling. Celebrate wins and recognize the winner. Celebrations can be the classic ringing of the bell, or an all company email announcement.At Xactly, we have had our reps record and upload a short mobile video on their phones documenting their best win of the year. These are available for viewing and feedback on our sales enablement platform, Inspire ™. Other sales team members can watch these videos to see how their peers are succeeding – how are they overcoming objections, and beating the competition. I looked at the video submission of biggest deal for Xactly last year, and see that 98 percent of our reps have watched it. It’s safe to say that’s a perfect example of role modeling.
- Verbal Persuasion “Verbal Persuasion increases self-efficacy when individuals are encouraged, by people they respect, regarding their capacity to learn and perform effectively,” (Bandura, 1986).Hopefully you don’t need a refresher course in “Sales Culture 101,” but it bears repeating: Let your sales reps know–unwaveringly–starting at the CEO-level down to their peers, that sales people can make quota. If they learn and execute the sales plays that the company has put in place, they can, and will, be successful. From my consulting experience, I’ve seen this message be most effective and powerful when delivered by peers.
To boost quota performance, use best practices in setting quotas as well as motivate the sales force both extrinsically through a well-designed, well-funded sales compensation plan and intrinsically by creating a sales culture that is cooperative, team-driven and fosters self-efficacy. Finally ensure that your reps have the tools and access to product knowledge, selling skills, to execute the sales playbook and master their profession. With these key things in place, quota performance will inevitably rise.