Quotas! Design Thinking To Solve Your Biggest Sales Challenge [Webinar]

Thanks everybody for joining us today and we are really excited to have you here. This is probably everybody's favorite topic next to sales compensation. So we're going to have a little bit of fun with it. We're going to talk about quotas and we're going to talk about the book and some of the findings from the book. But I want to emphasize this is not just a book about quotas, it's a book about problem solving. So we're going to get a bit into problem solving as well. So for you right brainers out there, you're going to feel real comfortable because we're going to be talking about some creative problem solving techniques. And if you're left Brainers, we're going to be going all little off road for you. So just hang on and enjoy the ride and try some of these techniques out. Just to give you a little bit of background on who we are at Sales Globe, we are a sales innovation firm. What that means is that we do work around problem solving for companies in areas like sales strategy, go to market, sales organization, design, talent, compensation, and of course, quotas. So we cover a range of different areas and our whole thing is how to help companies think differently about what they do. We've done a few books in the past. You can see some of them here. Another related book, what your CEO needs to know about sales compensation, you may find of interest, especially if you're getting in your sales compensation planning and thinking about planning this time of year. So that'll give you some ideas about how to connect the strategy to the front line. But we'll dive into the book on quotas. And as we were writing the book, we're talking with someone who interviewed us about it and they asked the question, why are you writing the book? And I sat and I thought, I said, well, it's because, you know, quotas are a really big issue for a lot of companies and we want to give companies a way to able to figure out how to, how to do better quota setting. And, and I went on and on and then I thought, well, that's not really a good reason to write a book. That's not a good answer. And I really thought about why we were doing it was really about the problem solving. It was about these questions you see here on the screen. Why do we repeat the same old solutions, especially with quotas? You know, we do the same thing every year, year in, year out, and sometimes it's just too painful to change and we end up leaving ourselves vulnerable to the competition because we're not doing something that's going to help the organization perform. We're kind of hindering the organization by not fixing something as fundamental as the quota setting process. So I asked, what can we learn from the story of quotas? And so I want to share with you the story of quotas. It's not the official historical story of quotas, but it's kind of an abbreviated version to illustrate some of the points here. And I want to start the story with a number. You see a number on the screen here, 61%, and think to yourself, does anybody know what this number represents? I can hear some of you screaming while we're on mute here. This number is the percentage of companies that say quota setting is one of their top three sales effectiveness challenges. Not just a sales compensation challenge, but a sales effectiveness challenge. This is a big deal. Quota setting is a big deal. And it's a big problem for a lot of companies, the majority of companies, as you can see here. So as we get into the story, in the beginning there was the number and it wasn't good. You can see a rep here who just recently received his quota. I think this is the beginning of this year, if I'm not mistaken. And you can see he's trying to get some traction on the quota. It's just not working. And you might have felt like this is you sometimes in terms of what you get with your organization, and it's not a good situation. But the battle becomes about the number, right? So the battle is about how am I going to get a better number, a smaller number, if you're in a sales role, if you're in a finance role, how am I going to be able to dish out that bigger number? And so the organization will be able to not only take it, but accomplish it. This makes me think about this regional sales VP I met with recently in Baltimore. And I talked with him and all he could talk about was how the number he got from corporate was too large and he wasn't going to be able to do it. And I went and talked to one of his peers up in Boston, their regional sales vp, same story. We were up in Salem, Massachusetts, actually outside of Boston. So it was kind of fitting with the Salem witch trials and crushing people to death, right, with their quotas. So he was talking, we're never going to get this number. And that became a big problem. And because this team didn't believe in the number, the reps didn't believe in the number, and the reps weren't able to achieve as well, as they should have. So it wasn't that the number was wrong, it was that they weren't getting to the number in the right way. And the company as a consequence didn't reach its number consistently. So it was up and down year in, year out and just not performing well. So that kind of sets the dilemma, right? So we have this one number that we're giving out. And so then the company looked to history as the answer. And you can see something that may look familiar to you on the screen. You see the corporate goal up there in the cloud, investor expectations, the business requirements, and then that number gets moved down to the organization. Does anybody know what this process is? This is called the cram down process, right? This is what we do. We take the number and we cram it down on the organization and we try to quote most equitably, the distribute the pain to the organization. Or maybe some people call it peanut butter. Right? So we're doing a peanut butter approach. We're trying to put the pain out to the organization in the easiest way possible so the organization can handle it. And it's very often based on history. We've got top down, we've got bottom up, a little bit of bottom up. Usually the bottom up is too little and it's too late in the process. It's happening after we've gotten the quota. And the bottom up is really kind of organization reflux, right? They're refluxing back this quota they've got. And that's not really True. Bottom up. 65% of companies use history for quotas in some form. But the odd thing is 55% of companies say the historical methods are one of their top quota issues. So why do they keep doing it? It's like doing the same thing wrong and expecting different results year in, year out. Well, we're just going to outrun it. Maybe the economy will get better. Maybe something will help us get over that hump. So we want to look beyond history. This is where a lot of organizations are caught up, obviously. So the company realized after a while, after a few years, that it wasn't solving the real problem. And this is the crux of the whole issue. It's not about the quotas. It's about solving the problem. And quotas appear to be the problem. And very often they are, but very often they're part of a bigger problem. So I want to talk about two things here today. One is solving the real problem. How do we get to the real problem? And this could be regarding quotas. It could be about sales compensation, it could be about sales effectiveness. It could be about your personal life. Right. So how do you solve the real problem? How do we operate on ourselves to do a better job of that? So I want to start this off with a question, and you're going to have to answer this to yourselves. Okay, really hard question here. Where were you when you thought of your last great idea? Now, I'm making two assumptions here. One is you actually had a great idea and then you were somewhere. Right? So think about a second. Where were you when you had your last great idea? Michael, where were you? Do you remember?

Yeah, I was actually at the airport waiting to board my flight and I had a sort of moment of genius.

Moment of genius. You're not going to share what that was?

No, it's my personal.

But okay, so he's. That you were at the airport. A lot of people say, I was out riding my bike, I was gardening, I was doing something other than in the conference room. So we were in the conference room, and then later on, I came out with a great idea. We hear this one a lot. I was in the shower, and all of a sudden I had this epiphany moment, this eureka moment, and it came out with this great idea. And so what happened was that you were in the conference room, you were working with your team, and you were grinding away on this. And then you use this creative principle. We talk about this creative problem solving principle around sales design thinking called walking away from the problem. And that doesn't mean you're giving up. What it means is that you're stepping away and you are giving yourself space to do something else. And what happens is your mind starts to go into this. Look, seek, combination function. It starts to put ideas, random ideas together. And all of a sudden, bam, that idea comes out and you go, wow, that's what I've got to do. And I'm in the shower and I'm thinking, that's the answer. But it was really not that it came at that point. This is your mind was doing and you were doing design thinking without even really knowing it. So what you're doing is you're stepping away from the problem and you're putting together combinations of ideas. Pretty amazing. So here's the dilemma. We have a lot of problems, but we don't have enough showers in the office. So how do we come up with a predictable way to be able to do creative problem solving? So that's the big question here you can see our 61%. So here are Your top challenges. In terms of sales effectiveness around companies, 61% say setting and managing effective quotas is a top challenge. And there's a whole bunch more that come after this. So you can see sales strategy, sales process, how do we hire and develop or hire and retain top talent? How do we develop and coach people? How do we align sales compensation with the strategy? How do we integrate M and A? So a lot of things that come along that are big challenges, and what's kind of interesting is that quota setting and quotas are not always the problem. Sometimes they're like the canary in the coal mine. They're indicating that there's a bigger challenge behind them. And so what we want to do is we want to look at what are the real problems, what are the real causes behind that. And so speaking of problems, I want to talk for a second about my daughter, Isabel. And, you know, not that she's the problem. It was really a problem she had. It was about a year and a half ago, I got a phone call from her, and she was on the side of the road, and she was, you know, visibly nervous. I could hear traffic running by. And I said, what's going on? What's going on? She said, well, my car, dad, it just died in the middle of the road. She lives up in North Carolina, in Chapel Hill, North Carolina. And she said, I was going down I40, and the car just died and went on, and it's off on the side of the road. And I said, what's going on now? She said, well, you know, I'm just sitting here. My boyfriend's here. I'm like, oh, that guy. And I said, well, you know, is it okay? She goes, well, you know, he's trying to help out, but, you know, he's really sensitive. And so he's starting to cry a little bit. I'm like, oh, man. So I immediately go into Boy Scout mode, and I get on the phone and I call aaa. They come by and they tow the car, bring it off to the AAA station. And I talked to them later, and I said, what's going on? And they said, well, sir, you know, the car is frozen up, and it's because your. Your daughter didn't put any oil in the engine. I'm like, that's odd. I thought we put oil in last time we were in Atlanta. Well, I said, well, so. So what do we do? And I said, how do we fix it? Well, sir, you can't fix it because it's kind of frozen up. It's like a Solid block, so there's nothing you can fix. And I said, what do we do now? Well, sir, you're gonna have to replace the engine. And I said, well, what does an engine cost? And he said, about $5,000. And I'm like, what, $5,000? And he said, well, you're free to go get an estimate somewhere else if you'd like. You know, you can leave the car on the lot for a couple days, but after two days, we're gonna have to start charging about $50 a day to leave it here. And I immediately, like any rational dad, I freaked out. I went to the Internet, and I started looking for places that could replace engines. So I started making calls, and sure enough, $5,000, $6,000, depending on whether I was going to get a reconditioned engine or a new engine. I found a place even that would. I could buy an engine and I could bring it to somebody to put it in. I thought, well, that's going to be a disaster, trying to piece those parts together. So I was at the end of my rope. And then I was looking around, and I called this one place. This last place I found had a lot of great reviews. And I. I got this guy on the phone, and his name was Jimmy, and Jimmy was in Raleigh, North Carolina, but he was clearly from New York, and I could hear him on the other end. And I started telling him what I wanted, and he goes, mark, Mark, tell me the story of the car. I'm like, the story? What are you talking about? The story. Tell me the story of the car. When did you buy it? Do you like it? Has it performed well for you? And I'm like, this is really strange. And I said, well, you know, Jimmy, it's been a good car. Did you pay a lot for it? Are you satisfied with the price? And I was like, well, that's kind of an odd question. Well, yeah, I wanted the Chrysler. I wasn't going to go to the Chrysler, but my wife and my daughter were there, and, you know, they called me, and I went over to look at the car, and it was a nice car, but the salesman. You know how salesmen are, Jimmy. He just wanted too much for it. So I did this thing, Jimmy, where I walk out the door to try to get a better price. And then my daughter started crying. He's like, daughters, daughters. They'll do it to you every time. And I'm like, yeah. So I bought the car, Jimmy. It's been a decent car. Any accidents? Well, you know, she did have a little Rear end collision. Oh, it wasn't a big one, Jimmy. You know, she just ran into this guy at the intersection. She was kind of distracted and kind of banged into. Any body work? Well, yes, in fact, we did have some body work and. Any repairs on the engine? Well, yeah, they did, Jimmy. They did some repairs on the engine and. Oh, and he's doing this oohing and ahhing for about two, three minutes. And he says, I'll tell you what I'm going to do. You bring it in, I'm going to take a look at it. And I said, at this point, I'm half sold. So I brought the car in. Next day, I'm in my office in Atlanta. It's quiet. We got this open studio space, real quiet early in the morning. And the phone rings, and I hear on the other end, mark. Mark, you're sitting down. Yeah, Jimmy, I'm sitting down. You sitting down, Mark? Yeah, Jimmy, I'm sitting down. What's going on? You're never going to guess what we found. You're gonna owe me a great review. And I'm like, what are you talking about? He goes, yeah, we opened up the engine and we found a rag in the oil pan. I'm like, what is this, some kind of scam, Jimmy? No, no, no. The boys, they're rolling all over the floor. They can't get up. They're laughing so hard. It's unbelievable what we found. I tell you what I'm gonna do. I put the car off to the side. We put a shroud over it until the investigation is over. What investigation? Sure enough, he has a shop owner's insurance company come by. They look at the situation. They find out that the company that actually did the repairs on the car previously left a rag in the oil pan. And so through the whole process, we ended up getting a free engine. And Jimmy got a great review. So think about that for a second. What happened there? What did Jimmy do? Jimmy was understanding the story, right? It's what he's talked about. When he started, he was understanding the story. So he was diagnosing the problem by digging into the story. And he was using a first step in design thinking called understanding the story. And he was asking what happened and how and when and who was involved and where it happened and why. And it was all these strange questions that nobody else asked. And you can see some of the answers here. And at the end, he told me, I said, you know, that was great, Jimmy. I really appreciate it. He said, you know, I could have just put a New engine in. But he said that wouldn't have solved the real problem. It was important to him to solve the real problem. So. So think about this as right brain creative problem solving done by a mechanic in North Carolina, which is kind of unbelievable. So I thought, well, if a mechanic in North Carolina can do this, then certainly we can all do it. But he's probably maybe smarter than all this together. But he used design thinking. So we're going to use a little bit of Jimmy's design thinking here and we're going to apply it to quotas. So we're a little bit on the right brain. But I want to go back to left brain first. I want to talk about left brain and left brain models because we have a lot of these and a lot of times we'll solve problems by intuition or what we've done before. But sometimes if we're good and disciplined, we'll use left brain models. Here's one called the revenue roadmap. So this idea here is that. And we use this a lot at sales globe. It's something we found over a period of years with a lot of companies that companies that perform well from a sales perspective tend to do four things really well. They tend to do a really good job of insight, understanding what's going on in the market with their customers internally. And they use that information to inform the sales strategy and all the sales strategy is just a couple fancy words for an action plan to get to a sales goal. So it has to do with things like what we're selling, our offers, our segmentation and targeting, our value proposition, overall approach to market. So it's the big plan then that's put into effect with the customer coverage model. Has to do with your channels and your roles and your sales process and your feet on the street or deployment. And then that's all supported with enablement that enable layers. So you can see the incentive compensation quotas and you've got people programs like recruiting and retention and training and development and tools and technology. So the big point on this is that sales compensation tends to respond to the upstream disciplines. We can't just solve sales compensation or solve quota problems by looking at them myopically. So the concept of upstream disciplines and downstream disciplines. So every upstream, every downstream discipline is affected by its upstream disciplines. So we have to look at sales compensation holistically. So for example, if the comp plans work, not working, we might find that there's a problem with the sales process definition or in terms of how we define the sales strategy or the clarity of the sales strategy. So there may be other problems outside of that. So if you double clicked on that, here's another left brain model we call the sales compensation diamond. And this really talks about how you do an effective job of designing sales compensation. So starting in the middle with the C level goals or the goals of the business and the roles in the organization, and then building upon that in terms of the framing of the plan, on the upper right hand side, your major plan components like your pay mix and your upside, you're linking pain performance together through your performance measures and your mechanics. You're aligning your team and financials together by looking at how congruent the program is and the plans are, and then how you're setting quotas and then you're operating for results. So good left brain models, they'll help you get to an answer, they'll help you solve a problem, but they may not help you solve the right problem. So if these are good tools and there are many others like this, how do we then apply the tools to the right problem? Well, we have to first of all redefine what our problem is. So I want to talk about the right brain side of this and make a shift over here and go a little bit off road here for just a couple minutes. So the year was 1985, and I was an art student in Philadelphia and I was looking for a job and I was in New York and we were doing the portfolio reviews. And what we did, those are kind of like interviews. If you do a portfolio review and the design director likes your work, you might actually get a real job interview. And what the professors told us at the art school is they said, well, what you want to do is you want to put together a cover letter and resume and you want to fold them up and you want to put it in an envelope and you put this thing on there, the sticky thing called a stamp. Put it in the mail and you're going to get some portfolio reviews scheduled beforehand. And when you get to New York, you're probably not going to fill out your entire schedule. So what you need to do is when you have a break in your schedule, stop and make some calls. You'll find a phone booth, which is this little building with glass on it that has a phone in it. And you put money into it. Find a phone booth and make some calls and see if you can fill out the rest of your schedule. So I was up in New York and I was doing some portfolio reviews and interviews. And I'm going around and I ended up on Madison Square park on 26th street, and I had some spots in my schedule. And there was this one firm that I was really interested in called Chemaev and Geismar. And they were one of the top design firms in the world in terms of corporate identity work. So they did logos like Chase Manhattan and Mobile PBS and many, many others. And there was this one partner, his name is Steph Geisbuller. And I wrote a note to Steph, and of course, he never responded. So I made the call and I called and the receptionist answered, and I told her my story, and I said, you know, I have some time today with Mr. Geisbuehler, have a chance to take a look at my portfolio. It was a long pause. Fully expect her to come back and say, well, Minister Guy Spuehler is in Europe, or Mr. Geispuller is meeting with clients, or frankly, Mr. Danilo, he has no interest in meeting with anybody like you. But she came back and she said, well, Mr. Geispieler has a spot open at 3 o'. Clock. And it was 2:45. And at 2:48, I was upstairs in the lobby right across the street. And I was in the lobby conference room. They put us out there because it kept us outside of the main office, I guess, in case anything happened. And so I'm waiting for him, and he shows up looking like this Swiss, German, sharp, impeccably dressed and looking the part of the designer. And he walks in, and I'm intimidated, and I'm sitting there with my portfolio, and he starts looking through, and I'm flipping page by page, and I'm showing him projects, and he's going, my. Then he goes, can you turn back a page? Go back a page. So I go back a page. He must like this project. And so he says, tell me about this project. I said, well, Mr. Geispieler, this is a flight museum. And we designed it so that it has ramps with glass floors, so you can walk over the glass floors and it feels like you're in flight. He goes, well, what other ideas did you consider? And I started talking about that. And he goes, well, what other concepts did you consider? What problem were you trying to solve? And I noticed that as I was talking, I was kind of repeating myself. And I also noticed that the temperature in the room started going up, and I noticed that the walls were getting closer. And before I knew it, he closed the book, the portfolio. And he said, thank you for coming in. He said, pass my thanks on to your professors and tell Them I'm frustrating that they're doing a great job of teaching people to make things look good and come up with answers, but they're not solving the real problem. And I left. The next thing I know, I'm back out on the street, and I had no idea what happened. And I thought about it for a couple days, and I realized he was talking about. I was really good at coming up with an answer or a solution, but it really wasn't solving a problem. And that was 35 years ago. And it's plagued me till this day, and it's driven me to ask that question about what we do in sales effectiveness, which is how do we solve the real problem? So I want to talk right brain here for just a couple minutes. And right brain is the creative side, the verbal side. And if we combine it together with left brain, we do a better job of problem solving. And you've probably heard this phrase called design thinking. It's kind of like, to me, it's the new innovation, right? When we had innovation, everybody was talking about innovation. It was in every annual report. Anybody. Everybody had innovation meetings, but they didn't know quite what they were doing. It was kind of a veneer. And we're kind of running into the same thing with design thinking. I'll talk to people. And they go, yeah, we're doing design thinking for our organization, so tell me what you're doing. And they'll go into, well, you know, we're empathizing with the user. And they go into a lot of soft conversation. I'm not quite sure what they're saying, and they're not quite sure what they're saying either. And we thought, you know, sales organizations need a little more literal way to approach how to do design thinking. So we called it sales design thinking. We gave it five basic steps. And I'm just going to go through the first two steps here with you. And you can see how it's laid out here, articulating the problem statement. We all have a problem. And then we move into the challenge question. We're going to dive deeper into these two steps in a second here. But then we do horizontal thinking, which is thinking divergently about a range of ideas. And then we do vertical development, which is we take the good ones and we develop those and design those and refine those. And then we start to move into how do we manage change? And underneath all this, you'll see that those words engage the outsider. What do you think the outsider is? The outsider is that person that is walking down the hallway, when your team has been working on a project in the conference room for days, and it might be your boss or your boss's boss, and they stick their head and they go, hey, Mark, how's that project going? Can I take a look? And everybody's like, oh, man, we've been working on this thing night and day. I can't have him stirring this thing up. The outsider is the person that understands the content, but they're not deep in the actual project that you're working on. So really important to have that outsider involved. So we'll talk about that as well. But the outsider shakes up thinking. So you want to make sure you have that element involved in your design thinking as somebody that's not part of your team, that helps you see perspective. Companies like Pixar use this. They talked about that a couple of years ago that they said when people get so deep in a project, they necessarily lose perspective. So what we have to do is we have people come in at different points to give context and give perspective and kind of challenge their thinking. So let's take a look at those first couple steps. So articulating the problem statement. The problem statement everybody's got, right? We start out with that. We know what we're trying to solve for, supposedly. And. And the problem statement ends with what? Maybe not an answer. It ends with a period. So a statement ends with a period and it's kind of closed. It's like this big object, kind of like that Isabel's engine, just this fused geological object. And so a problem statement doesn't help us with broader thinking. So we can take that problem statement and we can do some things like understanding the story and investigating why we're looking at what we're looking at and creating a solution vision. We can come up with a redefined challenge question. And a question by its nature has what. What does it end with? A question mark. So a question by its nature tends to be more provocative. It evokes thought more, evokes ideas more. So we like questions better than we like statements. So we're going to get to a challenge question. It's going to help you think differently about the challenge. So I want to be very literal here, and I'm going to apply this back to our company. So if we go back to the company's problem is a company in the automotive electronics industry, so they make things like GPS and antennas and all sorts of equipment for cars. It's put in during manufacturing or it's put in aftermarket, and they had Some performance issues in their, in their organization. And I want to show you a chart here that shows you what it looked like for them. They saw something like this when they looked at their quota attainment challenges. You see quota attainment on the bottom and 10% buckets of performance. And you can see on the vertical axis the number of reps in each quota bucket. What you'll see here is that very few reps are attaining quota. About 20% are actually attaining quota here.

Exactly what percent of, of reps should be attaining quota in terms of best practice?

That is a good question. You know, there's the best practice and there's the actual practice. In reality, about 42% of companies have, I'm sorry, companies have about 42% of reps at or above quota. Best practice, about 50 to 70%. And you want to think about why that is. So you would see this curve shifted to the right as you're describing, Michael. Why is that? Well, predictability, because we can see where the organization is going and we know we're going to hit our performance goals. Another is cost of sales because it's a lot cheaper to get there within the compensation cost of sales by not hitting all the accelerators and exacerbating those accelerators. So for example, you could still get to your company goal, let's say 40% of the people at quota, but you could win ugly, right? So you'd have a lot of high performers and you'd have a lot of low performers. And your high performers are hitting the accelerators and your low performers are. You're paying a base salary and they're not, they're not doing much. So you've got a cost of sales problem. The third reason is probably morale. This one, this one head of sales years ago told me, he said, you know, we want attaining quota to be a really special accomplishment and we only want about 30% of our people. That's kind of crazy. And he goes, yes, we want them to be well recognized for a special achievement. And I said, well, so if 30% of people are hitting quota, what does 70% feel like? They feel like losers, right? So we don't want our sales organization having that kind of mentality. So that's a really important motivational thing. So they saw this, they said, well, this doesn't look good. And most companies stop here and they don't go any further in terms of their quota investigation. They went a little bit further here and they went year to year. And they said, well, what's going on? Year one versus Year two in terms of quote attainment. They thought it was, they saw it was pretty sporadic and they concluded from this, we need to fix the quota process because the organization is underperforming. So all of a sudden this became their problem statement and they wanted to go after it and they wanted to solve this, which was exactly the wrong thing to do. The right thing to do was for them to go back and do what Jimmy did, which is understand the story. So if you think you understand the story and you're within the company, you probably don't because you understand it from your perspective. So if we look at the story of this particular company and we ask those questions, what we find is through interviews, through analysis, too many reps were below quota. We just saw that about 20% attaining goal. And how and when did that happen? Well, they grew through acquisition over the years. So they acquired companies, they kind of bolted them onto the organization. They didn't integrate them. So they had varied levels of integration. So they ended up with a lot of different sales teams, inconsistent design, they weren't doing what they thought they were going to do as part of the vision of the, of the acquisitions, which is they weren't cross selling. They had higher sales expectations as the market got, got tougher and, and it was wet. It was fine as long as the organization, as long as the market was good and the market was healthy. When it got tougher and higher sales expectations came along, they had porpoising performance up and down year to year. Who was involved? Well, sales, senior leadership. They did opportunistic M and A. So they were out looking for things and, and adding pieces onto the company and in finance that's another who they got involved and they became the pit bull for the C level. So they started going after the sales organization when they weren't performing well. Where was it happening? Well, it was across the organization, but especially in global accounts. And the other where was in their high performers, their 75th percentile performers and their reps with less than two years experience and they had no new talent flow. So they were basically hurting the organization. And why? Well, it's because of this aggressive MA growth. So it wasn't a healthy situation. So there's all this pain and suffering. We flip it around and we say, okay, well what would great look like? What would a solution vision look like for the organization if it worked really well? And we asked the same questions. Well, you know, what would it look like in terms of accomplishment? Well, we'd have quota performance up to that 50 to 70% of reps at goal. We'd be hitting our company revenue goals. They'd be more market opportunity based. It would be probably a staged introduction because it's a large organization. Who would be involved? Well, those high performers, we want a lower turnover there. Another who is the organization design? So we want to get more consistent sales organization design and some other who's are the people, the executives involved. So the theater leaders across the world, they've got to be engaged. We've got to engage finance and sales as a unified team and get them to work together. Where would it happen? Well, it's going to happen across all markets, especially in global accounts. Why? Well, why is the really important question here because this is what's going to drive your change? Why would it happen? Well, it's a huge benefit to shareholders. More predictable growth, stronger growth, lower turnover for finance, more predictable cost and more predictable growth. So if you take these components, take the red ones, I highlighted the red ones here. You can take them and just turn them into a redefined challenge question. So, so the redefined challenge question is kind of a run on question. How can we develop a solution that uses market opportunity based quotas? It drives company revenue goal attainment, it raises sales organization quota performance across all markets, especially those global accounts. We're engaging theater leaders and we've got year to year consistency and it's going to contribute to lower turnover for the top performers and the new hires and it responds to an improved sales organization design. And we're aligning finance and sales as a unified team. Okay, so that's a mouthful. That's a long question to take in, but it's got a lot of facets. Compare that to the old problem statement of we need to fix the quota process. Right? You're going to be solving a completely different problem here. So if you could take one thing away from today, it would be this, which is look at your problem differently and ask those questions the next time you run into a good juicy problem. Okay, so this is a different starting point. So I'm going to take this and I want to hit our second piece which is how do we use some of the best practice models in quota setting to apply to that models around opportunity, capacity and people. And this is really a trifecta, if you will. It's three pieces. There are three components that go together here. And this is one thing we found in the book that was really an important finding. Three pieces. Market, opportunity, sales, capacity and people. I want to hit each one of those just for a second here. So you see our cram down process here in the middle and one step we can take is to understand market opportunity and what's actually out there beyond just historical. And you can see a lot of companies here on the stat have issues of reconciling bottom up market opportunity. That's one of the sources we get that market opportunity from is from the bottom up. So market opportunity is driven by factors like what segments we're selling to, what offers we're selling, our macro market environment. And this is really the first step beyond history. So you think about the those evolutionary pictures that you saw of man from CRO Magnon man, then going to the successive levels of development, remember in the encyclopedias for people that are younger than me, those are books that we used to have in our libraries that we would look through when we were kids. The encyclopedias, they would go through and show you this evolutionary process. Well, this is the first step toward getting up off of your belly, which is using market opportunity. Three popular methods you can see here we go into in the book market factors, which is kind of like training wheels on historical. So you're taking historical information and you're doing modifications to that based on differences in markets or playing the Sesame street games of one of these things is not like the other. And so we're looking at all the markets and realizing well, they're different, one of them is not like the other. And so we might look at factors like market opportunity or wallet share or growth rate. And if we have high growth rate markets, we might uptick the gold versus low growth growth rate markets, we might down tick the goal. So it gives us adjustments on that goal. Opportunity forecast. Another popular method using pipeline to be able to have input to quotas. But the problem with pipeline is that we get what we get. Sandbagging, right? If you tell me you're going to set my goal and you're going to look at my pipeline in CRM, I'm not going to put a lot in there. So we have to bookend it with other information around retention, penetration and acquisition to make sure that we're getting a really good opportunity forecast and an account potential one that's very effective. Not as many companies are using it. About 26% of companies, it uses predictors of sales potential at the account level. So basically what we're doing is refining firmographic or demographic characteristics that can predict potential. So if we looked at the office products industry, for example, selling to corporate customers, we might find that potential for office products is equal to $1,500 a year per white collar worker, which might be divided into business machines and furniture and consumables. So it gives us a way to heat map the market. Right? So two, three very popular methods here. The other side is sales capacity. So market opportunity would say, hey, we know more about what's going on out there and where we can put the goal. Sales capacity says, well, we've got a certain capacity to be able to hit the goal. So we've got to have the ability in our organization to do that in terms of horsepower. And it has to do with things like head count, the amount of time people have to sell workload talent. And I'm going to drill into that here in just a second. So let's take sales capacity. Here's the basic equation. This is about as much math as I'm going to go into today. The basic equation for sales capacity at a rep level or a unit level. Think about it that way, which is the amount of sales time you have divided by what it takes you to do the work. Or think about it as workload per account or per deal. One equals the number of deals you could win or number of accounts that you could manage times the average revenue per account. That gives you your annual sales capacity. So what does that look like when you put numbers to it? Well, here's some numbers. If we looked at a rep that has 1000 hours per year to sell because most reps spend only about half their time selling. You divide that by 63 hours to make a sale. And it's not to just make one sale. It's to actually handle all of the prospects that you had in your pipeline that resulted in one sale. So we can trim the pipeline out. That makes it more, more effective and increases our capacity. Gives you 16 new accounts closed per year. $250,000 of average revenue per account gives you $4 million of revenue per rep. So you can see immediately and you can see the numbers down at the bottom of the screen. There are a number of different levers that you can pull to improve sales capacity. You can increase sales time, you can decrease workload through pipeline management. You can improve your talent. You can increase your average revenue per sale by selling better offers or selling further upstream in the organization. So very powerful tool sales capacity. And then when you put those two together, you'll see that there are a number of different methods. We talked about some of them already. If you look at them from a perspective of historical or based on potential of the account or the market and account orientation, more generalized versus more specific. So you've got flag quotas where everybody gets the same goal which works well sometimes in new customer prospecting situations. Historical which we've talked about using history to predict the future market factors which is the history on training wheels. We're doing some modifications to the historical account potential where we're using predictors opportunity forecast where we're using pipeline and historical information together. And then also account planning is a big method for strategic accounts. Using the account plan to provide information for goal setting which takes a certain level of trust with the team. That as we're doing our account planning you're not going to use that against them. But a very effective method to get details on what we can do within the account. So let's look at the third piece of the trifecta here which is people, probably the most important piece. So how do you get the team to work together? The roles and the rules of engagement. And I want to share with you a graphic that has a lot of moving parts on it. But I'm going to highlight a couple of them here. And this is in the book. We go into detail about how to understand the pieces here. But you've got process steps in terms of quotations setting everything from determining the market opportunity all the way to allocating out to the reps. And then you've got the organization levels from the board to the C level to sales leadership on down. And we made a few observations here. First of all, sales leadership tends to be most heavily involved in leading the quota setting process. Those are the solid circles with sales operations providing the strong support, which makes sense. Those are your open circles. What we also notice is on setting the corporate goal, too often that goal is set with the senior sales leadership and the C level and approved by the board without the benefit of information on market opportunity or capacity. Right. That's set based on overall corporate goals. So we can do a better job there. And if you look off to the right, bottom up input, bottom up input is not strong enough across companies. So the bottom up input as I mentioned before coming to too little and too late in the organization. And the organization is just responding to the quotas that you're giving them and that tends to be the bottom up input. A lot of complaining. So a lot of improvements we can make. So we go into how to get engagement with the team and how to get the team to work together in the book. But just a couple of points there on organization. So I'm going to sum up with 10 best practices for better quotas. Number 10, look beyond a single number. So you've got to get beyond the single number and you've got to start to look at the components of that number. Market opportunity, as we talked about. So incorporating market opportunity and then balancing that with sales capacity, what your organization can actually accomplish and that sales capacity can get much more complex than what we showed you here in terms of each channel, each job and their contribution to growth. But by doing number nine and number eight together, you can actually plan your growth. Not only just at the core of a plan your growth. Number seven, understanding the rules of engagement and creating a common definition of success for the organization. So how do we get them to work together? Leveraging bottom up intelligence for the corporate goal. So not just setting the corporate goal, but using bottom up input on market opportunity to do that. As I mentioned before, using the right quota method for each market type. So that whole range that I showed you, you're not going to just pick one. If you have a complex organization, you're probably going to be using a few different methods. You might even triangulate with those methods to find the right answer for the organization, emphasizing simplicity and scalability. So with all that I've shown you here, we've got to boil it down to its essence, to the simplest level, because it's got to be able to scale or else it'll crush under its own weight. We have to make it simple for people to understand, simple to automate and then speaking of automation, enabling with the right technology and the right data, engaging the organization through a communications and feedback campaign. So we mentioned people before, we've got to have a strong why on why we're making the change. And then we also have to have good communications loop in terms of helping people understand during the campaign how the change is going and how to support them during that change and then giving us feedback and then number one, solving the real problem and the story and using sales design thinking. So that's really the underlying idea here, is to make sure that you're using all these tools to come up with a better answer. So as we wind up here, my recommendations for you on the design thinking practice that one step of redefining your challenge question. I think if you practice that a little bit, start to build some creative muscle memory, you'll find that to be very powerful in terms of how you come out with thinking differently about that problem. So if you do one thing there, what that's going to do is it's going to change your starting point on solving the problem, which will make it a dramatically different answer. You can get the quotas book for your team. It's on Amazon and it's on Barnes and Noble and we also do workshops in these areas, so workshops on sales design thinking, quota setting and sales compensation. So if you have more questions and, or if you'd like to book a workshop with us, just reach out to us@infoalesglobe.com and I think we have a couple minutes for questions too.

Earlier you mentioned the cram down method and I think we've all experienced how painful that is. What advice would you give for sales and Finance to work more collaboratively? Collaboratively on that target set?

Yeah. Yeah. So I think the thing is they both have fundamentally different points of view. So sales wants to obviously go out and be productive and grow. Their motivation is obviously to get an achievable goal. And you know, we won't say it, but they wouldn't mind getting a lower goal anyway. Right. Finance wants to be able to make sure they're going to hit the number for the, for the business. And so they're all, all about how do we get to that number. And I'm kind of stereotyping a bit here actually. But the thing is we've got to find commonality with those two groups in terms of common goals and what they both can accomplish together. What I usually recommend when I look at these types of situations is helping sales to understand what the organization is trying to accomplish. They're not just trying to give them bigger numbers and helping finance understand more about what's going on in the sales organization, meaning showing them information on market opportunity, where the market is that information, and also getting them out in the field. So one thing I love to do is get finance or even CFOs out in the field to do ride alongs with reps to understand what's going on and do ride alongs with managers. So the one thing that the finance group does not always have visibility on is what's going on in the markets. So getting beyond the numbers and finding a common goal. So I've seen that happen in a lot of organizations when you start getting to work together.

And there's a quota methods continuum. And so if I'm stuck with a flat or historical quota methodology, what are some of the first steps I can take just to progress up that continuum and move towards a more potential based method?

Yeah, you know, I think what scares a lot of companies off is, is methodology and information and the data. And I think the data is one of the scary parts because it's hard to get good information on the market. When we talk about why only about 25% of companies use the method with predicting potential or estimating potential is because you can't just get it off the shelf. You've got to really build that competency and you really have to build that information yourself. And a lot of times for organizations that becomes a conflict competitive advantage because they source that information, they improve it, they refine it. But on the way to doing that, I think the first step is really something that doesn't take a lot of data, which is you take your historical goals and you find a couple or three key factors that make a difference in markets. And I mentioned some of these before. Around market growth rate, around wallet share, around penetration levels, around competitive intensity, even around rep levels of experience. And you can use those as modifiers. So you can use sales management intelligence to make adjustments on quotas before they're handed out. Adjustments on quotas based on those puts and takes and start. You're on your way to more of a data driven process. That's the very easy way to do it that we describe in the book. Okay, so I think we're at time here. Thank you everybody for joining us today. Great having the conversation. Be able to share this with you and again, if you have questions, reach out to us at info at salesglobe. Com. We would love to talk with you and grab the book and let us know what you think. Thanks for joining us today.