Today was a beautiful day for a lunch time run here in NH. I happened to be in a very hilly part of the state today and running hills is not my favorite thing! Today I tried a new strategy to get me up these hills. Instead of looking at the top of the hill like I usually do and thinking how high it is, how hard it is to get to the top, how long it will take me, I tried a new tactic. Today I kept my focus on about 10 feet in front of me. I wanted to just focus on making it the next 10 feet and not focus on the top of the hill. Before I knew it, I was at the top of this hill and I wasn’t winded or exhausted. I actually felt pretty good. What happened, did I suddenly get more fit! Nope, I just broke the goal down into small achievable increments.
So how does this relate to sales compensation! For starters, the top of the hill is like the annual quota. It is this really big monster that you have to tackle. By closing one sale at a time, you will eventually get there. Right? But it is so big! If the quota is set to high, the reps will give up because they don’t believe they can make it. Just like I usually give up on the really big hills and walk to the top instead of running, I believed that I couldn’t run the entire way! The reward was too far off for me to believe I could achieve it.
Quotas based on the dreams of management will have the same effect on the sales team, the sales reps will just give up trying. According to a survey by the Alexander Group 59% of the companies report correct goal/quota setting as the #1 challenge facing the sales compensation program. On top of that CSO Insights reports that less than 50% of the sales reps will achieve their quota. Quota is an integral part of your sales compensation plan. As you approach next year’s planning season, remember that quotas and goals that are aggressive yet realistic will be perceived as achievable by your sales team, something they can strive for. Look at each territory for the realistic opportunity within and structure the sales compensation plan with that in mind.
Also considering adding to your sales compensation plan shorter term reinforcements for achieving milestones during the year to keep your team on track to achieve their annual goals. If your sales compensation plan currently has just one component that has a rate change after the quota is achieved, your plans are structured like my hill, too far off to make a difference! Maybe a Q1 Kicker bonus or Quarterly Achievement bonuses that are part of the planned incentive amount are in order. Maybe Spiff, which is an additional amount to the planned incentive for targeting specific behavior during the year is what you need. I have seen Spiffs work effectively for new product introduction, end of life fire sales, as well as new logo acquisition. Just be careful to not have the Spiff goals compete against your quota.
Remember the best sales compensation plans translate the company’s strategic goals into measurable, actionable activities by the sales team. When structured around real opportunities within each territories and incentives structured to reward the right behavior, measured and calculated correctly, you’ll have a winning combination for next year’s revenue growth.