Administering the Quota System

Skill in administering the quota system is basic not only to realizing the full benefit for control purposes, but to securing staff cooperation in making the system work. Most critical is securing and maintaining acceptance of the quotas by those to whom they are assigned. Few people take kindly to having yardsticks applied to their performance. Constitutionally, most sales personnel oppose quotas, and anything that makes them doubt the accuracy, fairness, or attainability of those quotas makes them less willing to accept them, thus reducing the system’s effectiveness.

Accurate, Fair, and Attainable Quotas

Good quotas are accurate, fair and attainable. Obtaining accurate quotas is a function of the quota-setting procedure: the more closely quotas are related to territorial potentials, the greater the chances for accuracy. But, in addition, regardless of the type of quota-sales volume, budget, activity, or combination sound judgment is important in analyzing market data, adjusting for contemplated policy changes (and for conditions unique to each territory), and appraising changes in personnel capabilities, as well as in setting the final quotas. Accurate quotas result from skillful blending of planning and operating information with sound judgment. Setting a fair quota involves determining the proper blend of sales potential and previous experience.

Admittedly, whether quotas are fair and attainable depends not only upon the quality of management’s judgment but upon the capabilities and motivations of sales force. Sometimes, perhaps even usually, the extent to which a salesperson’s quota is fair and attainable can only be ascertained after performance has been recorded. Even then, management must exercise care in appraising variations from the quota-to what extent are they attributable to quota inaccuracies and to what extent to salesperson inadequacies? After all, quotas are not absolute performance standards, and errors are made in setting them.

If management believes that its quota-setting procedure produces accurate quotas and is confident that fair quotas are being assigned, then they should be attainable. Most quota- setting errors are those of judgment, most traceable to setting quotas above each salesperson’s expected performance to provide an incentive for improvement. Quotas that some sales personnel fail to attain are not necessarily unfair-whether they are or not depends on who fails to attain them. One executive offers this general rule. “You have set equitable quotas if your weaker people fail to attain them, and if you’re better people either reach or slightly exceed them.” Thus, in ascertaining fairness, management faces a possible dilemma because the quotas themselves are the performance standards most used for appraising the quality of sales personnel. Clearly, subjective evaluations of sales personnel according to qualitative performance criteria are required to ascertain whether quotas are fair.

Usually the sales department is responsible for establishing the sales quota, and no approval of a higher executive is needed. Within the sales organization, the task may rest with any of several executives. The chief sales executive may be responsible for setting the total company quota. But the individual breakdown may be delegated down through the regional and district managers. Or territorial sales potentials may be given to the district managers, and they set the salespeople’s quotas. Many attributes found it good compensation plans, territorial designs, and other aspects of sale management are also found in good quota plans.

Characteristics of a Good Quota Plan

• Realistic attainability: If a quota is to spur the sales force to maximum effort, the goal must be realistically attainable. If it is too far out of reach, the salespeople will lose their incentive.
• Objective accuracy: Regardless of what type of quota management uses, it should be related to potentials. Executive judgment is also required, but it should not be the sole factor in the decision.
• Ease of understanding and administering: A quota must be easy for both management and the sales force to understand. Also, the system should be economical to administer.
• Flexibility: All quota systems need adequate flexibility. Particularly if the quota period is as long as a year, management may have to make adjustments because of changes in market conditions.
• Fairness: A good quota plan is perceived as fair to the people involved. The workload imposed by quotas should be the same for all sales reps. However; this does not mean that quotas must be equal. Differences in potential, competition, and reps’ abilities do exist.