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performance expectations realistic, then sales management should include these new products in the quota However, if the dates are not confirmed or the projected sales volumes are indeterminate, then exclude these new products from the quota Give them their own launch incentive (an add-on) that expires at the end of the performance period Then, when you have more solid information, include these new products in the quota for the next performance period Quota allocation provides sales leadership with an opportunity to manage performance Quota allocation requires ongoing efforts from year to year to make adjustments and improvements
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Mid-Year Quota Changes
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Most companies need to consider mid-year changes to quotas Like mid-year account changes, mid-year quota changes require across-theboard adjustments, or case-by-case changes Sales management seeks to balance quota fairness by achieving forecast commitment While some mid-year changes cause an increase in quotas, many petitions for mid-year changes are the opposite, causing a reduction in quotas with no commensurate reduction in earning opportunities Complex sales organizations often provide for mid-year changes, but limit the scope of such changes with restrictive policies such as the following:
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No quota change can be made unless the performance opportunity will be altered by greater than 15% Quota adjustments are considered for changes outside the influence of the salesperson, but excludes activities associated with customer-buying practices, market trends, competitor actions, company fulfillment, and company terms policies No quota adjustments can be made without commensurate adjustments to other quotas to offset the change, positive or negative Any quota adjustment must be approved by all regional managers, the chief financial officer (CFO), and the vice president of sales
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Support Programs: Territories, Quotas, and Crediting
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No quota adjustments can be applied retroactively and none can be made at any other time than the beginning of the fiscal quarter
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While most companies will need to make quota adjustments, restricting quota changes enhances the importance of the quota and precludes excessive requests for dubious quota adjustments
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Making Mid-Year Changes
In some cases, sales management will need to make mid-year quota changes The following are compelling reasons to make mid-year changes:
Major economic change: Whether a dramatic positive upswing or a profound downswing in the economy, sales management may need to adjust quotas For major changes in the economy, an across-theboard quota increase will recalibrate performance and payout expectations A best-practice technique is to terminate the current plan, make all legally obligated payments under the current plan, then begin a new plan with the appropriate adjustments Account changes: Whether caused by mergers, acquisitions, reorganization, or account assignment fine tuning, make quota adjustments if the changes affect the performance opportunity by more than 15 percent Currency and pricing changes: Changes in revenue value caused by currency fluctuations or company pricing decisions should cause a similar offsetting adjustment to quotas Acts of God: Most sales compensation plans allow for quota adjustments caused by acts of God, such as major weather calamities
In summary, some quota adjustments may be necessary, but restrict the practice to protect the integrity of the quota management process
Sales Crediting
Sales crediting specifies when sales personnel earn credit for a sale We will examine sales crediting eligibility, timing, and adjustments
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Sales Credit Eligibility
Who should get credit for a sale The answer should be simple: the salesperson the person who closed the sale right In sales organizations with a single sales force, applying this eligibility definition is relatively easy However, in more complex sales organizations with multiple channels, overlay sales specialists, and team selling, the definition of sales credit eligibility becomes more clouded There are three major categories of sales crediting:
Seller sales credit: Simplify sales crediting by assigning it to those who have customer contact and can persuade the customer to act The single seller who influenced the customer to buy should receive 100 percent of the sales credit If two or more sellers influence the customer, then those sellers share the sales credit using a prespecified proportional split In target-incentive bonus formula design, sales management can double credit both sellers, but each seller must have an identical up-lift in their quotas to offset the double crediting In this manner, while sales crediting is double counted, it does not elevate payouts Vertical sales credit: Vertical sales credit refers to the upward crediting of sales results through the field management layersThis is an acceptable accounting recognition practiceThis is legitimate and is not considered to be double crediting Horizontal sales credit: Horizontal sales credit provides sales credit to resources who are not the primary sellers In a true economic sense, this form of sales crediting generates additional double costs Sales management often uses this form of double crediting to support the field sales strategy Sales credit is often awarded to sales support resources such as product overlay specialists and presales support personnel For example, a regional product overlay specialist will earn sales credit for all sales in the region regardless of his or her involvement with a specific sale Presales support specialists provide another example where double sales crediting supports the overall sales strategy In both cases, sales management makes a conscious decision to reward more than one person for a sale In these examples, horizontal sales credit promotes cooperation between sales personnel and those assigned to support them in the sales process
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