How to set quotas and design effective incentive plans in an economic downturn

Compensation and incentive plans have historically been a problem, in that many salespeople are unable to hit quotas. Only 49.8% of salespeople in tech generally hit their target, meaning that in any given year in North America, more than 398,000 of them don’t hit quota – or earn their on-target income. 

That number will be even higher in 2022, in part because companies tend to set unachievable targets and create overly complicated compensation structures. And now we’re headed into 2023 in a volatile economic environment, which means that it will be even more difficult to set quotas and design effective incentive plans. But, there are strategies to help solve this challenge. 

On December 14th, our CEO Asad Zaman hosted a live panel that featured two expert leaders who discussed how to design effective compensation plans that are fair to both the company and reps: Laura Guerra (VP of Growth at Pavilion) and AJ Bruno (co-founder and CEO of QuotaPath).

By watching this session, you will learn compensation plan fundamentals, how to properly design them, and how to best navigate these practices during the current market downturn.


Key Takeaways:

Takeaway 1: Sales reps are the heartbeat of any business, so the purpose of any well-designed quota and compensation plan is to ensure salespeople are motivated and engaged, inspire collaboration, and help retain top talent. 

Takeaway 2: Many companies fail in their compensation plans by selling dreams and promising massive on-target earnings that the majority of salespeople cannot achieve. This talent will likely become discouraged and begin to look for employment elsewhere. At the end of the day, you can make quotas and OTEs as high as you want, but this is an unsustainable method of finding talent.

Takeaway 3: Another pitfall when designing compensation structures is by making them overly complicated, especially when there are multiple departments and revenue models. Bringing in all key stakeholders that should be involved in the conversation and having regular alignment checks with them can help solve this issue. 

Takeaway 4: In tough economic times, leaders should make strides to acknowledge frustration and offer their sales reps support. Depending on the position your organization is in, this could be through quota relief, changing the compensation plan, hiring another SDR, or investing more in demand. At the rep level, a good exercise when feeling overwhelmed is to write down everything that’s under your control to gain clarity on your situation. 

Takeaway 5: Having more sales reps and higher quotas doesn’t translate to more revenue, so increasing quotas when times are tough isn’t a reliable strategy. Ultimately, creating more revenue comes down to consistent and repeatable pipeline growth, and if this isn’t happening, companies should work to figure out their demand issue before deciding to increase quotas.