Are Your Quotas Too High?
Before Simon Tecle agreed to turn around an underperforming sales team, he had one request for the leaders at the company — they had to let him reduce the team’s quota.
For the past several months, the sales reps on the team had been mired in struggle, reaching just 35 percent to quota as a team. The target had ceased to motivate them, and instead, served as a monthly reminder of their failure.
When Tecle was hired to take over the sales team, he saw a group of reps who had lost their way. They were listless on calls and going through their prospecting motions waiting to be the next one fired. Tecle knew rolling out a new sales training or performance incentive wouldn’t motivate them. What they needed was an easy win.
“With a salesperson, even the smallest ‘yes’ gets people going.”
So, he gathered his reps together for a training session and then told them to forget the quota finance had assigned them. Instead of giving them a new target, he let them set their own team quota. The number was 30 percent less than their original quota, but the point was, it gave the reps something to build on after months of failure.
“That does a lot for an underperforming team. We didn’t hit our revenue number right away, but we started hitting some daily numbers. Then that led to some weekly numbers, which led to monthly numbers,” Tecle said. “Slowly what happens is [the team starts thinking], ‘Hey, we can do this.’”
While quotas are designed to be a motivational target that takes into account the revenue a company needs to generate and the deals a rep can be expected to close, that’s not always reality. Sometimes the delicate balance gets out of whack, whether it’s due to a misforecast in new business or a sales strategy that isn’t working.
As a result, even a seemingly reasonable quota can become unattainable, leading to low morale and underperforming reps, said Tecle, who now works as the VP of sales at SyncroMSP, an IT operations platform provider. In those situations, it might be time to re-adjust your targets.
“Low morale means what I’m doing isn’t working and I can’t do this. Until someone tastes success, that’s going to be a constant theme,” Tecle said. “With a salesperson, even the smallest ‘yes’ gets people going.”
This story is part of a series about sales quotas.
What Causes Unattainable Quota?
Whenever Collin Cadmus interviewed a sales rep for a role on his team, he’d ask them why they wanted to leave their current job to work for him. The most common reason: His reps were bragging about hitting quota every quarter and they wanted in.
As a VP of sales for tech companies Aircall and Doctor.com, Cadmus learned that the best way to create a team of overachievers is to set an achievable quota. That doesn’t mean it can’t be ambitious, but there needs to be a realistic sales plan in place that enables any rep to hit the target, Cadmus said.
It requires making sure there’s enough pipeline to support the quota and that it’s distributed equally among each rep. When that happens, the best reps will stick around and more will want to join the team.
“If the quotas are not achievable, nobody’s going to want to stick around,” Cadmus said. “And if they’re only achievable for the best reps, again, the rest won’t want to stick around.”
It sounds obvious, but Cadmus, who now runs his own sales consulting firm, said unattainable quotas are an enormous issue. In fact, a 2019 Salesforce forecast estimated that 57 percent of reps would miss their quota.
Of course, sales leaders and finance executives don’t set out to create unattainable quotas, so it’s helpful to dig into what causes the misalignment. Cadmus, who works closely with startups, said early stage leaders often make the mistake of treating quota as a growth lever. They raise it each year with the expectation that their reps will use it as motivation and deliver.
“If you don’t have a plan for how you’re going to achieve that quota, you’ll end up with the reverse effect.”
Quotas don’t work that way. If you’re in that situation as a sales leader, Cadmus said, you need to make sure that there’s a strategy in place that involves increasing leads, market penetration or marketing spend, to justify the new target.
“If you don’t have a plan for how you’re going to achieve that quota, you’ll end up with the reverse effect,” Cadmus said. “Now you have a negative psychology that’s going to have an enormous impact on your team.”
Sometimes misalignment happens when the sales team grows. There’s often an assumption that revenue will continue to grow the same amount each time you add a new rep, but that’s not always the case, thanks to the law of diminishing returns, Cadmus said.
While a team of 10 sales development reps might double the output of a team of five, that doesn’t mean a team of 100 SDRs will create 10 times the amount of business. Eventually, those reps will overlap and start selling to the same company, which creates inefficiencies. You have to account for that in your revenue forecast, he said, otherwise, you’ll have a team of reps missing their targets.
But sales leaders can also make assumptions in their forecasts that create misaligned quotas. The biggest mistake Cadmus sees leaders make is overestimating their account executives’ abilities to generate their own pipeline. The more time you expect your AEs to prospect, the less time they’ll have to sell. And the more demos they book, the less time they’ll have to prospect.
The result: January may be booked with meetings, but February and March will suffer.
Perhaps the most egregious cause, however, is the quota buffer, according to Tecle. This occurs when a sales leader increases the quota a small percentage to ensure they’ll reach their revenue goals even if a few reps fall short of their target. On the surface, a small increase in quotas won’t have much impact on reps.
But buffers often start at the top with the CRO inflating the revenue target they give the VP of sales, Tecle said. The VP of sales may then increase it a few percentage points to the next sales manager. And they’ll increase it a few more points for the reps. While the managers are protected, the reps could end up with a 10 percent increase in quota and a target that’s unattainable.
“That’s a very poor way of doing it,” Tecle said.
Of course, it’s not always easy to recognize when a quota is out of reach and when a rep is simply underperforming, but there are signs.
‘A Happy Team Is a Selling Team’
Tecle has a simple saying when it comes to gauging the morale of his team: “A happy team is a selling team.” When he took over the underperforming sales team, he saw reps sapped of that joy.
“There was this sense of, ‘I’m failing, I’m failing, I’m failing,’” Tecle said.
If a team doesn’t think that its quota is attainable, it’ll be reflected in its morale and behavior, Tecle said. You’ll see reps who are listless on customer calls, lack the motivation to prospect and end up leaving the company in high numbers.
“If you’re not internally motivated by something or a small win, it impacts every little bit — your engagement, how you interact with your team and with your customers,” Tecle said.
But you can also see warning signs in your team’s performance metrics. While there’s no exact science to determine when your quota isn’t achievable, Cadmus suggests evaluating team performance on a quarterly basis. What’s best for each team will vary based on their sales cycle, but he suggested two benchmarks to track as a good rule of thumb:
Has your team ever hit 100 percent quota for more than six months out of the year?
Have more than half of your reps ever hit 100 percent quota in a year?
If the answer is “no” to either question, then your quotas might be too high, Cadmus said. Your top-performing reps can also be a helpful barometer. If they aren’t hitting the target, then you know there’s a major problem, Cadmus added.
“At that point, the whole team just says it’s not even possible,” Cadmus said.
Making the Case for Lower Quotas
Lowering quotas mid-year is never an easy decision. It often has to be cleared by both the finance team and the board of directors, which means it’s easier to blame the reps than change the forecast.
That’s why it’s important to lay the proper groundwork with finance and your own reps before you reach that stage, Telce said.
Whenever finance gives you a revenue target, Tecle always asks himself “How is he going to sell this to his team?” He suggests agreeing on a sales plan with finance to reach that number and then validating it with historical sales data.
He then recommends presenting that plan to the team to get their buy-in. A rep’s annual quota may be realistic, but if they don’t know what it takes to reach it, it’ll appear daunting.
“In a role where morale, happiness and confidence matter, you have to show them how that number is attainable.”
Once you’ve established that plan, you can refer back to it to identify misalignments in the forecast. If the CFO predicted that marketing would bring in 500 leads a month and it’s only generating 100 leads six months later, it’s easier to make the case to lower quotas, Tecle said.
But there’s an argument to be made that setting lower individual quotas at the onset creates a more productive team. Tecle has found it more effective to set a target that at least 80 percent of his reps can hit, rather than what many leaders like to do, which is “aiming high and settling low.”
“In a role where morale, happiness and confidence matter, you have to show them how that number is attainable,” Tecle said. “If someone sees a high number and thinks there’s no way in heck I can hit that. Guess what? You demotivated them.”
Lowering quotas has also helped him rehabilitate a struggling team. Once his reps set their new quota, he saw a switch go off in their performance and attitudes. Some reps exceeded it and others fell short, but they hit their collective goal. For the first time in months, the team had something to celebrate.
Tecle then built off that success. He slightly raised the number and tasked the high-performing reps to share what they were doing with their colleagues. This created buy-in on the team. Now, any struggling reps had a support system in their peers, and proof that it was possible to hit their quota.
Reducing the quota renewed their confidence and motivation to sell. As a result, the team ended up bringing in more revenue that month than they did under the previous quota. More importantly, it helped Tecle establish a culture of success.
“Everyone was pulling each other up,” Tecle said. “A team that said, ‘We’re failing, we’re failing, we’re failing,’ was now saying, ‘We’re winning, we’re winning, we’re winning.’”
Motivating Reps Without Increasing Quotas
When the CFO gives you an increased revenue target, you typically have two options as a sales leader: hire more AEs, or raise individual quotas and ask more from your team.
But those are flawed options, Cadmus said.
If you have a high-performing team with a predictable pipeline, hiring more AEs may disrupt that predictability. As the leads get distributed, each rep’s pipeline may be weaker as a result. While you’ll bring in more revenue, fewer reps will reach their quota. And it’ll increase your operating costs.
Raising individual quotas to match the new expectations also has its downsides. While your top performers will clear the bar, the middle of the pack will either barely meet it or fall short. Again, you’ll reach your revenue target, but a team that once celebrated its commission checks together will be divided, Cadmus said.
There’s a third choice, however. If you have a team of high-performers, Cadmus suggests a combination of commission accelerators and transparency. At Aircall, he walked his team through the company’s financial forecast, which called for his reps to exceed quota by 25 percent to reach the company’s revenue target.
“Why do we want to push quotas as far as we can?The one little stress lever I have to control, I’m going to max it out? It’s crazy. It doesn’t make sense.”
Transparency allowed him to set clear expectations and to show his team that he wasn’t playing games with their quota, and the accelerator provided the incentive to deliver on the higher expectations.
The strategy worked because the quotas remained at a level everyone could hit and his reps had the pipeline to support exceeding those goals, Cadmus said. It also allowed him to maintain the culture of success that he cultivated.
“If you’re on a team where everyone is beating their goal, it’s such a different environment. It’s a team where everyone’s celebrating at the end of the month and everyone’s excited to get their commission checks,” Cadmus said. “If you have a product that sells well and some salespeople who are good, you can have that team. It’s up to you how you set those quotas.”
After all, sales is a stressful profession. Instead of constantly raising quotas and adding pressure, it might just be better, and more efficient, to keep quotas stable and add incentives to boost performance.
“Why do we want to push quotas as far as we can?” Cadmus said. “The one little stress lever I have to control, I’m going to max it out? It’s crazy. It doesn’t make sense.”