To Quota or not to Quota

by on May 29, 2013 · 0 Comment POSTED IN: Top Sales Dog
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Here’s an idea that’s likely to make sales reps’ hearts beat a little faster – and give their bosses apoplexy:

What would happen if you had a sales force with no quotas?

Research from the Stanford Graduate School of Business suggests that the answer is: More sales. In one case, a new sales compensation plan without quotas increased revenues by 9 percent.

It’s widely known that most salespeople don’t make quota. But conventional wisdom says you need them anyway to motivate salespeople. The research suggests that quotas do motivate, but not necessarily in the ways intended.

Every sales manager knows that their people game the system – holding back sales from one month to the next, backdating invoices, urging buyers to take delivery today and send it back next month if they don’t want it. It can get to the point where nobody expects the numbers to add up: If top management wants to generate $1 million in revenue, they tell front-line managers that they want $1.2. To get the $1.2, front line managers set the quotas to add up to $1.5. Most people miss the numbers, so next year the goals are even higher. And the games begin anew.

The research found that eliminating quotas eliminates the costs and inefficiencies of all this gamesmanship. It allows everyone to focus on the real job: maximizing revenues and profits.

The researchers note that getting rid of quotas might not be the right thing for every company. I’d like to hear from salespeople and managers: Does your company use quotas? Do they help or hurt? Post your comments below.

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