Incentive Insights: How Many Salespeople Should Meet Their Quota?

What percentage of salespeople should achieve their goal? Many companies come to us asking that very question&#x2026;but the answer isn't as straightforward as a single number. <br clear="none" /> <br clear="none" /> From a motivational standpoint, 60 to 70 percent of salespeople should be at goal, but the vast majority of companies are closer to 50 percent. "What are we doing wrong?" they wonder.<br clear="none" /> <br clear="none" /> The answer is, they may not be doing anything wrong. While having two-thirds of salespeople reach their sales goal is an admirable objective from a motivational standpoint, over time the percentage will inevitably drop to 50 percent&#x2014;especially for public companies. <br clear="none" /> <br clear="none" /> <b>Reasons for Disconnect</b><br clear="none" /> <br clear="none" /> The expectation that far more than half of salespeople should achieve their goal originates from multiple sources. One is academic and trade press articles suggesting two-thirds of the sales force should be at goal. Indeed, one popular book on sales compensation suggests just that. <br clear="none" /> <br clear="none" /> But the expectation comes from more than books and articles. It also comes from the fact salespeople want to win, and the most prevalent measure of winning is meeting&#x2014;and beating&#x2014;their goal. As a result, sales management wants a solid majority of their salespeople at or above goal to keep the sales force motivated and engaged. <br clear="none" /> <br clear="none" /> Sales managers and executives have a self-serving interest, as well: If a solid majority of their salespeople are achieving their goals, managers are virtually assured of achieving their own.<br clear="none" /> <br clear="none" /> But are such lofty expectations realistic? Organizations set aggressive company-level financial targets, which in turn are allocated to the sales force. The result is challenging national and individual sales goals that less than two-thirds of salespeople can meet. <br clear="none" /> <br clear="none" /> While every company may strive for a sales force that is so strong that most salespeople can achieve a stretch goal, rarely does actual performance meet that expectation. In the rare cases when most salespeople make their stretch goal, companies often raise expectations year after year, so that eventually, it becomes impossible for two-thirds of the sales force to meet goal over a long period. <br clear="none" /> <br clear="none" /> For most firms, the classic standard deviation bell curve depicts sales force performance versus goal, with overall performance hovering around 100 percent nationally. When the sales force is at 100 percent of goal overall, only about half will meet or exceed their sales goal. <br clear="none" /> <br clear="none" /> In fact, many sales forces slightly skew to the right in their performance distribution, meaning slightly less than 50 percent of salespeople will achieve their goal at 100 percent national performance.<br clear="none" /> <br clear="none" /> <b>What Can Be Done?</b><br clear="none" /> <br clear="none" /> So can you match company expectations&#x2014;that more salespeople should achieve their goal&#x2014;with reality? In answering this question, you should consider three options:<br clear="none" /> <br clear="none" /> The first is to have the vice president of sales more involved with the finance and marketing departments when setting of national financial goals, to ensure the goals are more attainable. This would increase the probability of a majority of salespeople achieving their individual sales goals. <br clear="none" /> <br clear="none" /> For most businesses, however, this option is unrealistic. Public companies are under tremendous pressure to set (and hit) aggressive financial targets. Setting financial targets at any level below an aggressive stretch level will simply not work, either in the executive suite or on Wall Street.<br clear="none" /> <br clear="none" /> The second option is to set individual sales goals that add up to less than the national goal. This would allow a higher percentage of salespeople to achieve their individual goals, and would do so without altering the company's financial targets. <br clear="none" /> <br clear="none" /> Unfortunately, this is likely to be just as unpalatable with senior management as the first option, but for a different reason: They'll consider it an unacceptable "de-linking" of financial and field sales goals. <br clear="none" /> <br clear="none" /> This tactic also has implications for the cost of the sales incentive plan. Most plans have an accelerated payment plan once a goal is reached, and if individual goals are artificially low, the plan will pay out more than budgeted at the "true" expected national performance level.<br clear="none" /> <br clear="none" /> Given the unsuitability of the options above, perhaps the only likely (if least appealing) alternative is to change the company's expectation of the number of salespeople who should achieve goal when the organization is at 100 percent nationally. In theory, two-thirds of salespeople can achieve goal if they work hard enough. <br clear="none" /> <br clear="none" /> But having two-thirds of the sales force at or above goal is simply inconsistent with aggressive financial targets and the typical distribution of individual sales performance. The expectation that two-thirds of salespeople should be at goal is simply not realistic. <br clear="none" /> <br clear="none" /> <b>Where Do We Go From Here?</b><br clear="none" /> <br clear="none" /> Sales managers and executives may believe too few of their salespeople are achieving their goals, based on expectations in published literature or simply their desire for their sales organization to "win."<br clear="none" /> <br clear="none" /> But as we've noted, this is unrealistic. Difficult financial targets, combined with the typical distribution of sales performance, make this expectation virtually impossible to achieve over a long period of time. Understanding why will allow the sales organization to reset its expectations. <br clear="none" /> <br clear="none" /> <i>Chad Albrecht is an associate principal with ZS Associates, a global management consulting firm specializing in sales and marketing consulting, capability building, and outsourcing. He can be reached at <a href=""></a>.</i>

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