Salespeople often talk about quota accuracy. It is very important to them. Accurate quotas motivate salespeople to perform. They create a tight link between pay and performance: reasonable effort will yield a reasonable bonus. When quotas are viewed as inaccurate, though, the opposite occurs. Salespeople tend to feel de-motivated and pessimistic about their earnings potential.
The powerful link between quota accuracy and sales force motivation tells us it is very important to generate quotas that are perceived as accurate. But how do you go about setting accurate quotas? We propose a subtle answer: Think of each quota as a sales forecast. Then, the manager’s job is to make each sales forecast as accurate as possible. Consider the implications:
- Quotas are perfectly accurate when everyone reaches 100% of quota.
- Quota error is the gap between quota and actual sales. If someone is at 103% of quota, then quota error is 3%. And, if someone is at 97% of quota, then quota error is still 3%.
- When quotas are set with high accuracy, your quota performance distribution should be normal or bell-shaped, with most salespeople close to either side of 100%.