Quota vs. Target vs. Goal
"You keep using that word. I do not think it means what you think it means." - I.M.
A Tale as Old as Time
Last week, a good friend of mine called to tell me he had just been “laid off.”
He was understandably upset. No one wants to experience that.
Compounding his frustration was the fact that he was at 113% to quota on the year.
Oh, and that his company was still hiring for sales roles — it was not a layoff, but a firing (not sure how companies continue to be allowed to violate laws around layoffs vs. terminations, but oh well).
He asked me the question countless others have asked: “Why did I get fired when I was hitting quota?”
Unfortunately, I didn’t have a good answer for him. After all, it could have been a number of things.
Still, this friend’s termination highlighted perhaps the most pervasive and traumatizing aspect of a career in Sales — even for objectively top producers, you never really know where you stand.
There are a number of reasons for this including incompetent and unethical sales leaders, volatile markets, and more.
However, I believe the most common reason is also the most simple reason: No one knows what “hitting quota” really means.
Some of you may already be thinking, “uh … Mark … we all know what quota means.”
My guess is, you don’t. Or, even if you do right now, you have or will encounter a situation where it doesn’t mean what you think it means.
As you read this chapter, you’ll likely be reminded of the various times you were subjected to wildly varying definitions.
My Objective
If successful, this chapter will serve as the definitive guide to understanding the most misunderstood concept in Sales: Quota vs. Target vs. Goal
Before We Start
I want you to know that this chapter is pretty heavy into the Revenue side of the business, meaning most of the content will be keenly applicable to Sales, Marketing, Business Development, and Retention.
However, I believe all readers will benefit from learning these concepts.
Founders, CEOs, CRO, or any leader in charge of Sales, Marketing, Business Development, Retention, or Operations: This chapter will be invaluable and you should be able to directly apply it in your organization. If you do, you will see almost immediate improvements in performance, efficiency, productivity, employee engagement, and overall culture.
Salespeople and other related Individual Contributors: You may have no control over whether or not these concepts are used in your career. However, learning these concepts will prepare you to ask far better questions when choosing sales roles, negotiating for yourself, and having clearer communication with the leaders to whom you report.
All other readers: I firmly believe these concepts in this chapter, if you read them carefully, apply in many other organizations outside of Revenue-related orgs. After all, the principle concepts revolve around the importance of precise definitions, proper expectation-setting, and avoiding dysfunction.
Let us reflect on the importance of Expectations
As you’ll recall from the previous chapter entitled, “Great Expectations,” at the root of every — yes, every — dysfunction in business is either:
Unknown expectations, and/or
Unrealistic expectations, and/or
Unmet expectations
The confusion around “Quota,” “Target,” and “Goal” is perhaps the granddaddy of all misaligned expectations.
The fact is, across hundreds of thousands of organizations, there are no clear definitions of quota, target, and goal.
Because of the lack of clear definition, most organizations subject their Revenue functions (Sales, Marketing, Business Development, Retention) to dysfunction on a daily basis.
That dysfunction causes confusion, resentment, and failure.
I want to fix it, and this is my attempt to do so.
The Status Quo
Well, there is no status quo. Or, there is but, as mentioned before, it varies so wildly across industries and organizations that it is, at best, a hodgepodge of misunderstanding.
Some organizations use “quota,” “target,” and “goal” interchangeably, but without clear definitions, and then use the terms rigidly in the most sensitive of situations (compensation, performance reviews, and more)
Some use “target” or “goal” as their number, but openly state that only 60% of the organization will hit those targets or goals.
Some take a top-down number from the Board and simply make up quotas, targets, and goals which match the Board number.
Some take a bottom-up approach and report a target which is simply the sum of all the bottom-up goals.
Some take a bottom-up quota approach, but report a target which is less than the sum of all the bottom-up quotas.
Some will give just an annual quota, but will terminate long before the year is complete.
Some will give an annual and quarterly quota.
Some give a monthly, quarterly, and annual quota.
Some have quotas for reps, but not for executives.
I could go on and on, as I’m quite sure you could as well.
We’ve all seen the insane ways these things are defined, measured, incentivized, and reported.
It needs to stop.
The Solution
We must define the terms. I will provide my definitions, and I submit that they be used without variation in your organization.
Definition of “Quota”
The minimum number a salesperson must hit in order to:
Keep their job and the associated salary and benefits* and
Earn more than 0%, but less than 100% of target variable commissions/bonuses for that role
*There will, of course, be times when companies fold or have to do layoffs, even when people are meeting quota. But that should be incredibly rare, and should be done with precision and honesty.
Definition of “Target”
The number a salesperson must hit in order to:
Keep their job and the associated salary and benefits and
Earn no less than 95% of target variable commissions/bonuses for that role and
Earn additional commissions/bonuses upon exceeding target
Definition of “Goal”
The number a salesperson attempts to hit in order to:
Keep their job and the associated salary and benefits and
Achieve more than 100% of target variable commissions/bonuses, typically associated with a personal objective.
Now, let’s explore each of those in more detail.
Quota
As a reminder, quota should be defined as the minimum number a salesperson must hit in order to:
Keep their job and the associated salary and benefits and
Earn more than 0%, but less than 100% of target variable commissions/bonuses for that role
Quota must and will change on as regular a basis as is dictated by a number of factors including, but not limited to:
Salesperson tenure
Territory size
Types of leads provided
Quantity of leads provided
Changes in ACV which may be determine by Enterprise, Mid-market, or SMB as well as any pricing changes implemented by the company
Note: Quotas will change mostly in the first 12-24 months of a salesperson’s tenure. Your intention should be to get to stable quotas as quickly as is practicable and predictable.
Quota should very rarely be missed.
Whenever I hear a company talk about 60% of their reps hitting quota, I know they are not using quota properly, and I know there is widespread confusion in that organization.
A solid — not spectacular, but solid — organization should have 90%+ quota attainment. This happens when,
The company has accurate forecasting.
The company’s recruitment strategy results in the hiring of at least average talent. Doesn’t need to be “rock stars.” Average or better is fine.
The company properly budgets for the time needed to properly onboard a new salesperson.
The company has quality training, coaching, and enablement tools.
When quota is used properly, failure to meet quota should only result from one of the following:
A bad hire or a rep who has otherwise decided the role is no longer a fit and stops caring about performance.
A major, reasonably unforeseen market event
A major, reasonably unforeseen deficiency in the company. For example, if quota is based on a rep receiving 100 warm leads in a month, but Marketing/Business Development misses by a large margin which mathematically nullifies quota.
If your organization fails to consistently achieve 90% quota attainment, you’re either inappropriately using the term, are truly horrible at forecasting, or are otherwise fundamentally broken.
However, the easiest one to fix is properly using the term quota and aligning your performance management and incentive plans accordingly.
Quota should be enforced.
You get to decide how to enforce quota, but you must do so. Without enforcing quota you will create confusion, misalignment, and even potential legal issues.
You must document how quota is measured and what happens when quota is not achieved. For a few examples,
You may measure quotas on a quarterly basis. And you may decide your policy is for a rep to be terminated if two consecutive quarters are missed and the most recent trailing 60 days of performance shows no sign of the new quarter’s quota being achieved.
You may measure quotas on an annual basis, but divide performance management up into months and quarters. You may decide that anytime a trailing X-day period is off track by more than Y%, termination is warranted.
Again, it is up to you, but you must be transparent and consistent.
Quota and the production between quota and target should be aligned with a variable compensation plan which decelerates below 100% of target.
For example:
a salesperson who meets quota and hits 90% of target may earn 75% of target variable compensation
a salesperson who meets quota and hits 75% of target may earn 50% of target variable compensation
a salesperson who meets quota and hits 50% of target may earn 25% of target variable compensation
(I don’t want to go too deep into compensation plans at this time, but will in an upcoming chapter. I am not a fan of any compensation plan which pays 0% of target variable compensation, even if the salesperson fails to meet quota and may be terminated. It is poor for culture for salespersons to earn 0% of target variable compensation unless they, in fact, sell 0% of their quota. Do not create an employer brand which terminates salespersons and leaves them destitute at the same time.)
Note: Quotas will change mostly in the first 12-24 months of a salesperson’s tenure. Your intention should be to get to stable quotas as quickly as is practicable and predictable.
Target
As a reminder, target should be defined as the number a salesperson must hit in order to:
Keep their job and the associated salary and benefits and
Earn no less than 95% of target variable commissions/bonuses for that role and
Earn additional commissions/bonuses upon exceeding target
Like Quota, Target must and will change on as regular a basis as is dictated by a number of factors including, but not limited to:
Salesperson tenure
Territory size
Types of leads provided
Quantity of leads provided
Changes in ACV which may be determine by Enterprise, Mid-market, or SMB as well as any pricing changes implemented by the company.
Note: As with quota, targets will change mostly in the first 12-24 months of a salesperson’s tenure. Your intention should be to get to stable targets as quickly as is practicable and predictable.
A solid — not spectacular, just solid — organization should see:
individual targets hit roughly 80% of the time, and especially as the average tenure of sales staff increases.
team targets achieved 95% to 110% of the time, and especially as the average tenure of sales staff increases.
Targets should be aligned with an uncapped commission/bonus structure which allows the salesperson to earn far more than target earnings and, whenever possible, include accelerators to commission and bonus plans.
For example, a salesperson who hits 110% of target should be compensated no less than 110% of the compensation at 100% of target.
Ideally, a salesperson may also accelerate their variable compensation. For example, a salesperson who hits 120% of target may earn 140% of target compensation.
(I don’t want to go too deep into compensation plans at this time, but will in an upcoming chapter.)
Goal
As a reminder, goal should be defined as the number a salesperson attempts to hit in order to:
Keep their job and the associated salary and benefits and
Achieve more than 100% of target variable commissions/bonuses, typically associated with a personal objective.
As with targets, goals should be aligned with an uncapped commission/bonus structure which allows the salesperson to earn far more than target earnings and, whenever possible, include accelerators to commission and bonus plans.
For example, a salesperson who hits 110% of target should be compensated no less than 110% of the compensation at 100% of target.
Ideally, a salesperson may also accelerate their variable compensation. For example, a salesperson who hits 120% of target may earn 140% of target compensation.
(I don’t want to go too deep into compensation plans at this time, but will in an upcoming chapter.)
The failure of a salesperson to meet their goal should carry absolutely no penalties whatsoever. After all, it is their goal and is beyond both quota and target.
Where possible, the organization should provide individually-tailored incentives which motivate salespeople even more to reach their goal.
Here’s another way to look at it.
Imagine you decide to start your own business. Your spouse is supportive, but wants to know how you will know if it is working.
So, you set for yourself three numbers: Quota, Target, and Goal
Quota is the minimum number which pays your bills and allows you to continue the venture without too much stress, but knowing you need to improve.
Target is the number where you can pay the bills, save some money, and have enough money left over for dining out, entertainment, vacations, etc… This is a number which tells you the venture is working well, but not to get cocky.
Goal is the number where you can pay the bills, save some money, and have enough money left over for dining out, entertainment, vacations, etc, and do something really special for your spouse, family, or yourself. This is the number which tells you the venture is working very well, but still not to get cocky.
So, how do we put these concepts into practice?
Redefine the terms (completed above).
Commit to using the terms properly and consistently.
Articulate how quotas and targets are chosen, and how they are realistic and aligned.
Document expectations on quotas and targets, as well as any additional goals your people have.
Provide continual transparency and visibility into progress toward those expectations.
Choose exactly what you will do to make it “most likely” for our people to meet those expectations.
Give proper feedback, commensurate with what was achieved.
We don’t celebrate barely hitting quota. We do reinforce that the person who hit quota is, in fact, stable in their role as long as they continue to meet quota.
We do celebrate hitting target. Hitting target is a win and wins should be celebrated.
We absolutely celebrate when a salesperson’s goal is met. In fact, as long as the salesperson is ok with it, you should celebrate the achievement publicly and give the salesperson and/or their manager a chance to articulate why they chose that goal, how they met that goal, and what achieving that goal earned the salesperson.
Documenting Quota, Target, and Goal Expectations
If there is a time for communication overkill, it is here. You simply cannot go wrong by thoroughly documenting expectations.
Here is what I suggest:
All employees should be provided with a document which details all definitions and expectations. That document should be delivered,
verbally in groups.
verbally in 1:1’s, with a printout handed to the employee.
via email.
via Docusign, with the employee and their manager both signing that they have fully read and understood the document.
All employees should be able to demonstrate that they understand the expectations.
A short online quiz on definitions, how metrics are calculated, how compensation works, etc… is helpful.
Wherever possible, progress should be published in real-time.
Dashboards with daily progress reports
Reviews in 1:1’s
Isn’t that micromanagement?
Yep. Sure is. And that’s a good thing when it comes to defining quota, target, and goal and ensuring your people fully understand what is expected of them.
Documentation Examples
Here are a few examples of how you may choose to articulate and document definitions and expectations around quota, target, and goal.
FAQs
“Do I need to use all three terms? Why can’t I just use one?”
Yes. You should use all three terms.
First of all, it is highly unlikely you aren’t already using these terms. You may be using them interchangeably. You may be using two of the three.
However, unless you can commit to perfectly using just one term AND you can keep your team from using more than one term, you are much better off using all three, but making their definitions and application 100% clear and precise.
“Isn’t it unnecessarily negative to tell salespeople that they will be terminated if they miss quota?”
Not if it’s true.
I’ve never met a quality sales professional who didn’t want to hear clear expectations. As long as you are using the term properly and setting realistic and aligned quotas, there is nothing wrong with clearly articulating that a failure to meet quota will result in termination.
“My company uses multiple numbers, but not all make sense. For instance, we have a “goal,” a “stretch goal,” and a “board number.” How do I navigate this?”
Unfortunately, that question is far too common, and especially in start-ups. (toby story)
Founders either purposely or unintentionally create confusion by using several different numbers for the Board, investor pitches, internally with the CFO, to the head of Sales, and more.
The best advice I can give you is to try and influence your company to adopt the definitions in this chapter.
When that isn’t possible, you have every right to demand complete clarity on the number or numbers to which you are accountable, and which drive your compensation. Get your manager to put the numbers in writing and with clear definitions. I’ve given some templates earlier in this chapter.
“I want to be strict with quota, but there is a certain rep whose performance merits termination, but who I really think can turn things around. What should I do?”
That can be tough. After all, we don’t want policies which inappropriately constrain us or otherwise prevent us from making what we think is a sound decision in an edge case.
However, let me challenge you a bit.
Are you sure they don’t just “look the part” and you’re giving credit where it isn’t due?
Are you willing to make this decision the new precedent and follow it in future cases?
Here is where I think it makes perfect sense to create new precedent:
When you personally have failed the person so badly that they did not have a reasonable chance to meet expectations.
When there is a marked change in the industry or market which gives you very high confidence that this will be commonplace, and not an edge case.
Even then, be very careful. And, where possible, an impartial person may be able to help you see if an exception truly is warranted.
“What if the team/organization meets target, but individual salespeople don’t?”
This is a common occurrence. When it happens, all staff should be included in any celebration of a target or goal being met, even if they did not meet target, goal, or even quota.
Just make sure that individuals know that the expectations of their role haven’t changed.
“What if the team/organization fails to meet target, but individual salespeople do?”
This is similar to the previous question. Any salesperson who meets target or goal should be celebrated, even if the team fails to do so.
In Conclusion
I know this was a lot of information. Still, it’s critical we commit to mastering precise terms, definitions, and applications so we can eliminate dysfunction, at least in this part of the business.
If You Need Help
I am happy to work with you 1:1 on how you can implement these concepts in your organization. Shoot me a message and we can set something up.