In last week’s post, we looked at staggered quota quarters, a novel approach for smoothing out the rush to close business at quarter-ends and balancing the enterprise’s workload. As a former Sales VP myself, I would love to see those results. Making sure that those results actually happen is a management challenge, and the Sales VP plays a key role there.
First of all, the advantages cited in the last post – more predictable business flow, smoother product delivery, and availability of key sales resources – are compelling. Any Sales VP will gladly plow through three smaller “end-of-quarter rushes” every calendar quarter to realize those advantages. Regarding the disadvantages, the first one cited – confusion and lack of focus – is a challenge every sales manager must stay focused on. And the second one – administrative overload – isn’t anything I’m going to lose sleep over.
I agree with the my CFO colleague that the single biggest issue with staggered quarters is senior management willpower (as he puts it) – all the effort of staggered quota quarters will go for naught if the enterprise ends up bowing to fiscal quarter pressures. Insulating the sales force from the whims of senior management is where the Sales VP really earns his/her pay, and here are some was to do that:
· Manage for predictable results. With staggered quota quarters, it’s especially important to avoid last-minute surprises. Maintaining forecasting discipline is one way to avoid them. In fact, additional financial analyst support to bring more structure and discipline to the forecasting process may be worth the expense.
· Keep your perspective. Bringing in that last deal or two may not be as important as it seems during the end-of-quarter rush. The Sales VP may be the person in the best position to help everyone remember that.
· Protect sales compensation. Bringing in last-minute business may require sales concessions that wouldn’t otherwise be necessary. In these situations, the Sales VP may need to make sure that sales compensation is no lower than it would have been if the business had closed as originally planned.
What are your thoughts on this? Have we overlooked any important advantages or disadvantages of staggered quota quarters? Are there other ways the sales VP can help make sure the approach works as planned?
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Staggered Quota Quarters: A CFO’s Perspective
This month we step away from the Deadly Sins of Incentive Compensation to discuss a truly interesting suggestion about quota structure, from the Sales VP at one of our clients. At his company, regional sales quarters are staggered, so if there are, say, three regions in the company, each region’s quarters end in a different month. Here’s what that company’s quota quarters might look like for fiscal 2016 (with a 12/31 fiscal year):
What do you think? I see the following advantages to this approach:
1. More predictable bookings/revenue flow. Because salespeople often work best when they’re under quota pressure, many enterprises see a high concentration of revenues at quarter-ends, which can often lead to quarterly results significantly more or less than was expected. That lumpiness can be smoothed out by having about one-third of the sales force face an end-of-quarter in each month of the year.
2. Smoother product delivery. For enterprises that deliver a physical product (as opposed to, say, software), the smoother order flow puts less strain on their manufacturing and shipping capabilities.
3. Availability of key sales resources. In high-pressure sales closes, scarce and critical resources include the most articulate pre-sales specialists, senior managers to show the flag and make deal decisions, and legal and financial specialists to negotiate terms & conditions. These resources aren’t stretched as thin when quota quarters are staggered.
But I also see the following risks:
A. Confusion and lack of focus. The approach is complicated, and a quarter-end can no longer serve as a rallying point to get the entire enterprise focused on a single goal.
B. Administrative overload. For administrative functions, three small monthly “fire drills” – for determining revenue recognition and processing sales compensation, for example – may be more time-consuming and inefficient than a single bigger one each calendar quarter.
C. Senior management willpower? Regardless of how the enterprise manages its sales force, it must deliver its financial results according to its fiscal year (and fiscal quarters). The benefits of having staggered quota quarters will be completely lost if the C-suite ends up pressing salespeople to bring in business even when that month isn’t the end of their quota quarter.
My concern is that the last reason above – revenue pressures on senior management – can trump all the other reasons. So as interesting an idea as staggered quota quarters is, I would only recommend the approach for enterprises that aren’t publicly traded, and that have had little difficulty achieving quarterly corporate sales targets.