How to Overcome the Challenge of Constantly Changing Quotas

I’ve had a handful of customers reach out to me lately on how to tackle the issue of constantly changing quotas due to account transfers. I recently ran a podcast on this topic where I explored the causes of these transfers, the impact they have on Sales teams and the greater organization, and effective solutions to put an end to the perpetual cycle. Although my ultimate solution is to get a handle on the underlying cause of the volatility, I focused on fixing the sagging floors to give the company time to repair the crumbling foundation. Here's a recap of what I discussed. 

Causes

The most common reason for constant quota changes is rep churn. And in today’s turbulent economic climate, companies are experiencing massive amounts of it. In fact, I recently worked with a client that suffered from 200% annual rep churn (meaning there were an average of two people who filled every one position throughout the year), and accounts were constantly being reassigned as a result.

Another potential factor is the rapid growth of the customer base, and the need to constantly add or rebalance workloads based on available capacity. An electrical engineering company I collaborated with last year implemented a time system for sales reps to work with an account. After that time, the account was transferred so the rep could focus on new prospects. This constant shifting of accounts necessitated the company to frequently rebalance the rep workloads as each engineering project involved different mixes of products and complexity.

Companies that engage in acquisitions often experience extended periods of account transfers as they integrate new customer bases and explore cross-selling opportunities. In my recent experience, the majority involved acquiring new products and discovering untapped cross-sell potential. As a result, there was a prolonged period of reassigning accounts to ensure efficient management and to capitalize on these new opportunities.

A less common cause is internal chaos, such as a series of rapid CRO or CEO replacements, each with their own vision of the go-to-market model. These changes can cause a short-lived but chaotic transfer of accounts. In the last year I have seen this happen with only one company—they changed the sales model three times over the course of six months, with account ownership strategy changing each time.

The Impact on Sales Teams

The constant adjustments of quotas resulting from account transfers can have adverse effects on Sales teams. First off, reps may find it challenging to adapt to the constant changes in goals, leading to a demotivated and underperforming team. What’s more, the lack of clarity in account allocation can make it difficult for reps to prioritize their efforts and make informed decisions, which can affect their overall performance. Additionally, this situation can cause ambiguity and impede effective communication between Sales teams and management.

The Impact on Business

Constantly changing quotas can have a negative ripple effect on a business. Firstly, it can confuse customers, if and when inconsistent coverage, messaging, and loss of native knowledge occurs. Each account has unique sales preferences, such as end-of-year purchasing, but frequent account transfers result in a loss of sales knowledge. Moreover, varying messaging from different sales reps adds to the confusion and dissatisfaction—both of these can potentially lead to client churn. Furthermore, constant fluctuations in compensation rates disrupt financial planning and forecasting. This makes it challenging to effectively manage and allocate resources, introducing inconsistency and unpredictability in revenue and profit generation. Lastly, constant changes in quotas often require shifting territory assignments. This instability in territory patch associations further adds to the effect on business.

Effective Strategies to Overcome the Challenge

To overcome this challenge, organizations can implement the following strategies:

Isolate the pain

If the account reassignments are coming in for a certain type of account, then that’s something to work with. Two years ago I worked with a company that had a lot of new clients coming in and a lot of rep churn—a perfect whirlwind of issues. I took a look at their top accounts and noticed they were not changing hands. It was only the really small accounts that were. In this situation, we isolated the pain by designing the plan around accounts shuffling. The plan had two measures: the first, for large accounts, had a stable quota and a relatively high incentive weighting, with a high over-quota acceleration as the quota is accurate. The second measure was for small accounts and had a volatile quota, resulting in low over-quota acceleration. Inaccuracies reduce the risk of an explosive payout, and the incentive weight will be low, alleviating company risk. This second measure will not have a minimum performance level. This approach only works if the accounts being transferred between reps are expected to be small.

Pad the quotas

When small accounts are frequently transferred, another approach to address the situation is by padding the quotas through overallocation. For instance, if the cumulative sales goal for 10 representatives is $10M, and each representative normally receives a $1M quota, assigning them a quota of $1.2M can be considered. This results in a cumulative roll-up of $12M for the 10 representatives. If one representative departs and accounts require reassignment, there is no need to adjust the quotas.

A sinking fund

For this, a two-fold approach is implemented within the compensation plan. This includes both an annual measure and a monthly or quarterly measure. The annual measure holds significant weight in terms of assessment and compensation allocation, representing the overall quota to be achieved cumulatively by the year's end. Throughout the year, the monthly or quarterly results are accumulated and added together, providing a clear indication of progress towards meeting the annual quota. It is important to note that this approach ensures that a minimum level of performance, typically set at 80%, must be reached in order to receive compensation. Going above and beyond this minimum level allows for increased payouts, including substantial bonuses when exceeding the quota by a significant margin. As for the monthly measure, compensation is provided on a flat basis. This approach is best suited for upsell and cross-sell teams, as the complexity of renewals calls for a differentiated approach.

Babysitting

One common response that companies employ is to assign a rep to babysit a full portfolio of accounts until a new resource is hired. This temporary arrangement includes a special compensation agreement with higher earnings potential. However, this approach is only effective when new hires are quickly onboarded and the babysitting period is short-term. Last year I had a customer take this approach but for extended periods of time. As a result, the babysitters became overly reliant on the additional earnings and resisted offloading the accounts. Client churn increased as a result of the overburdened rep, and the company faced difficulties in hiring new replacements and providing territories. What a mess…

It is important to note that while the methods outlined above can mitigate the corporate impacts of constant account responsibility transfers, they are essentially band-aids for a larger underlying problem. To address this issue at the source, focus on reigning in the negative impacts of account transfers and addressing the underlying causes of unwanted rep churn and demand volatility. The implementation of these methods should be viewed as a temporary solution while efforts to stop the root cause of account reshuffling continue. In the meantime, happy hunting!

Some of the content in this blog originally appeared on LinkedIn.