Most of Your Reps Are Underperforming: Did You Mis-set Quotas?

Were your sales goals set realistically and cost-effectively in the first place? If more than half of your sales reps are below quota, the answer is, "Probably Not."

Let’s be blunt. If fewer than 50% of your sales reps reach their annual quota, your organization faces an existential crisis. If, as a CEO, Board Member, or CRO, you see it as anything less, you've missed the point.

Your risks are significant. It goes way beyond whether you are reaching your revenue goals.

• Churn risk rises – especially with your top performers since they are the ones who can most easily get new jobs,

• Company morale goes into the toilet, including among those NOT in sales,

• Investors and Board Members lose confidence, and

• It can become a never-ending cycle downward.

The only way to effectively address this is to look in the mirror, starting at the top of the organization. Anything else will provide band-aid fixes that will not solve the root problem. If you do anything less, you will be right back where you are now in twelve months. And that is not acceptable.

The people in your organization have got to see you owning the problem. This post is written as if it were a communication from you to your organization.

“We let you down. We set goals we believed were attainable, but in hindsight, we didn't set you up for success. The remedy to that starts today with the following changes.

"Quotas for next year have been revisited. Our goal is to have at least 70% of you at or above your quota for the coming year.”

[Management aside: The most successful SaaS organizations operate at right around this level.]

"We have carefully looked at recent funnel and market data. “One-off” accounts have been isolated and are not used in calculations of the expected norm for most territories. We have built territories based on the number of Ideal Customer Profile (ICP) accounts in each territory and the percentage expected to close within 12 months. All of this is based on historical data.

"We have focused on repeatable processes. How many accounts representing our ICP are in each territory? How much average ACV do they represent? We have removed from our calculations other accounts that don’t meet those profiles and will ask all of you to avoid chasing squirrels in any of them.

"Quotas have been based on 4-6 times OTE while still taking into account the territory creation just outlined.

"This will allow us to

• Keep commission payouts in line with CAC and

• Align with industry standard benchmarks.

"We have changed the stages in our CRM from being based on what we have done to what the prospective customer has done. Our CRM stages will now be based on The Buyer’s Journey.

The Buyer’s Journey (Stages)

1. Deciding whether a problem or an opportunity exists

2. Deciding whether the problem’s or opportunity’s existence is worth addressing

3. Deciding where addressing this problem or opportunity fits in overall priorities competing for the same resources

4. Evaluating/Vetting suppliers

5. Implementation and usage questions are all answered

6. Pricing/Negotiation (includes timeframes)

7. Complete a Purchase

• Bringing in team members for consensus as appropriate to organizational culture

"Instead of focusing only on currently qualified leads, we will instruct our SDRs to set meetings with anyone who is a potential influencer in an ICP account. We will ask you, the AEs, to work with prospects from these earliest stages.

"This is all driven by a statistic we have recently been made aware of from Forrester.

Forrester research found that executive buyers selected the seller who engaged them at the “what to do?” stage about 74% of the time.¹

Take a minute to let this statistic sink in. Taking advantage of this understanding creates some of the best low-hanging fruit available to any organization.

"Since we are currently seeing an average close rate of around 20%, just engaging a few accounts at this earliest stage of the selling process will add almost 4x the bookings to those prospective deals. Further, additional research suggests that when we start at the earliest stages of the Buyer’s Journey, there is much less price pressure/negotiation at the end of the cycle. Larger deals.

"During our Sales Kickoff Meeting in January, we will hold sessions on how to adjust your sales cadences to incorporate this updated approach.

"To make sure you are all compensated fairly, we will implement a simple 50/50 OTE compensation model in the coming year.

Base:

• 50% of OTE

Commissions:

• Flat Base Percentage rate that adds variable comp = 50% of OTE at 100% of Quota Attainment

Accelerators:

• 1.10 x Base Commission Percentage from 101% to 110% of quota

• 1.20 x Base Commission Percentage from 111% to 125% of quota

• 1.50 x Base Commission Percentage from 126%+ of quota (uncapped)

"We will be delighted if many of you go well into the uncapped accelerators. It is more cost-effective for us to have a few of you in accelerators than to have many reps achieving below quota.

[Management aside: If you run the numbers comparing what rep compensation was last year under your old plan, vs. what you will pay out under the plan above with fewer reps but at least 70% of them equaling or exceeding quota, you will be pleasantly surprised.]

"We have counseled out of the organization salespeople we believe are not going to be able to make this transition with us.

[Management aside: Your top performers have got to see that you understand the cancer that underperformers can be within the organization. Note that these are good people, but sometimes all of us get to a mental state where a completely new set of surroundings is the best thing.]

"We are excited about where these changes will take us in the coming year."

Source

1. Norbert Kriebel et al., “What Does It Take To Win With Executive Buyers?”, Forrester Research, December 12, 2013 (based on a Q4 2012 executive buyer survey).