People Strategies: Use of production quotas requires planning, management

Linda Bower is a speaker, executive coach and human performance improvement consultant in Rogersville.

The organizational use of production quotas to manage human behavior backfires more often than it achieves its purpose.

The idea behind a quota system is a good one: give people a goal, usually financial, measure performance against it and pay accordingly. When this concept is applied, however, it is rarely so straightforward.

Many companies take shortcuts; they assign quotas and let people figure out how to achieve them. In these cases, quotas are based on the company's financial needs and not on marketplace or salesperson realities. It is a set up for frequent failure and loss of high-performing workers.

One of the largest high-tech companies was famous for this type of quota-setting before taking a big financial dive. The top executives would determine a number that was assigned to the level below them. That level increased the number and distributed the quota to level below them. The next level increased it and so on. By the time the last quota carrier received his or her number, it was grossly overstated with no basis in reality.

The company's quota system went out of control. Every year the quotas increased regardless of marketplace and personnel changes. Not only did the company begin with an arbitrary number and up it for every level down, it upped the base number every year until it was so utterly out of whack with the marketplace and personnel capabilities that the system collapsed.

Most of my jobs in the past 25 years have been governed by quota performance. I've reacted to it as a salesperson, sales manager and sales executive. I've observed untold numbers of people deal with quotas.

Too many people are crushed by a well-intentioned system. My caution is that companies are moving too fast to reflect on the consequences of assuming that quota systems run themselves.

It seems to be a normal human reaction to focus on the quota at the expense of planning daily actions required to achieve the target. People are defined by their percentage of sales quota: if they are under quota, they are low performers; if they are over quota, they are high performers.

Instead, performance should be defined by the actions taken to achieve quota.

As consumers, none of us are blind to the behaviors of a salesperson on the hunt to make quota. Quotas are the reason that salespeople have a negative stereotype; they are behind the greedy behavior of salespeople. But quotas cause more insidious problems in organizations.

Without supports in place, quota systems cause undue turnover, stress, personal failure and financial loss. These are extremely high costs to an organization, especially when compared to the cost of crafting a reality-based quota system.

Ironically, the way to thrive within a quota system is to rise above it. To achieve quota one must minimize its role in defining self-esteem and client relationship progress, while maximizing its role in the financial success of an organization.

If I could design a dream quota system, it would have four components:

First, a quota system needs to be based on a balance between marketplace opportunity and a company's growth objectives. Anything less undermines the credibility of goals and causes the over- or under-payment to individuals.

Second, every quota would be accompanied by a rationale for the quota and a strategic planning process. Quota setting and achievement requires planning. Companies need to teach people how to plan, give them a process to follow and a means to communicate and receive feedback on the plan. This is about the only way to increase forecast accuracy.

Third, a company defines competencies required to achieve the quota. Each quota carrier is assessed for his or her ability to demonstrate specific competencies resulting in an individual development plan.

Fourth, managers of quota carriers need a coaching process that balances appropriate behaviors and company financial requirements. Managers need to be at least as proficient in the planning and competencies required of those reporting to them. They need to guide and model appropriate behaviors consistently.

Don't be a victim of quotas by leaving quota attainment to individual judgment. Quotas are a financial promise to an organization. Give people the ability to keep their promises.