As active members in the RevOps and Sales professional communities Pavilion, RevOps Co-op, and Women in Sales, we always listen to the questions and conversations concerning quota and compensation strategy.
Recently, we’ve noticed an uptick in questions surrounding quota relief.
- When should you offer quota relief?
- Who qualifies for quota relief?
- How do you accommodate quota relief for managers of teammates out on leave?
What is quota relief?
Quota relief is defined as a reduction in a quota for a limited period to help the rep or leader have a fair shot of achieving their on-target earnings. It is typically granted when a salesperson or leader cannot to meet their quota due to extenuating circumstances, such as illness, vacation, or a family emergency. Quota relief can also be granted if a company is experiencing a temporary decline in sales or a change in the sales environment.
Companies generally grant quota relief on a case-by-case basis. However, we are starting to see companies standardize quota relief processes to make it more fair across their teams.
Below, we’ll discuss quota relief for new sales hires, reps on leave, and managers.
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New hire quota relief
Question: How does your company handle compensation for new AEs?
For many new reps, that means an unlikely chance they’ll hit their entire on-target earnings (OTE), which they agreed upon when accepting their role.
So, to motivate your new hires (and retain them), we recommend offering quota relief.
Here’s how we think about it at QuotaPath.
For reps to hit their OTE in their first year, you’ll have to increase the amount you pay them over a ramp period.
You could do this by:
- Raising the commission rate
- Or, offer other ways for new hires to earn commissions or bonuses
Raising the commission rate
We don’t love this way because you end up paying really high commission rates. For instance, if your standard compensation plan offers $120K OTE with a 50/50 split, that’s an estimated $5K in monthly commissions. Annual quota equals $600K, with a monthly quota of $50K.
For a 3-month ramp-up period, that looks like:
- Month 1 = $0 quota
- Month 2 = $12.5K quota
- Month 3 = $25K quota
- Month 4 = $50K quota full quota
So, if you want them to earn full OTE just by paying commission, then in their second month, in order to have them earn $5K in commissions on a $12.5K quota, you end up paying a 40% commission rate. Yikes.
Offer ramp-up MBOs
The second option is our favorite. You reduce quota, keep commission rates intact, and provide new hires other means to earn bonuses.
For instance, you can offer milestone or single-rate bonuses once a rep completes a series of trainings, hits a prospecting goal, secures X number of demos, etc.
We like this one a lot. Whatever your management by objective (MBO) is, it’ll help the rep learn your product and positioning better (and faster) and give them an early taste of success before they rely entirely on quota targets.
For example, in their second month with the org., the reps are responsible for selling $10K each. To fill the delta to hit full OTE, you offer a bonus once the reps run three demos or prospects 10 new customers.
You combine MBOs with a bonus and reduced sales target.
Quota relief for leave of absence
Question: How do you adjust quota for reps out on leave?
Like the standardization of quota relief policies, we’re also seeing a rise in companies solidifying parental leave plans for sales teams.
“At most companies, when a sales rep returns from parental leave, they have a normal quota instead of a ramp quota. So they return to work with limited to no pipeline, yet are paid and evaluated against a fully productive AE quota,” wrote Co-Founder and CEO at Parentaly Allison Whalen in her blog.
Our suggestion: Pay the rep their full base while on leave and a percentage of the OTE they miss out on while on leave. Then, when they return, set up a ramping quota so they have time to refill their pipelines.
For instance, in this blog on paid parental leave, a sales leader who advocated for compensation policy changes at her organization finalized this proposal:
- Reps on parental leave earn 60% of their OTE while out
- Distributing pipeline opportunities based on the sales cycle stage and splitting a percentage between the rep who takes it on and the rep who is on leave (i.e., the further along the deal, the larger the percentage to the rep on leave)
- Ramping quota upon return from leave (based on sales segment)
What you set the quota ramp to will vary according to your sales cycle. However, remember that it should be shorter than a standard ramp hire because you’re welcoming back a returning employee, not a brand-new hire. If you have a short sales cycle, consider a few weeks of ramp time before holding them to 100%.
Quota relief for a sales manager
Question: Is it market standard to also give the rep’s manager quota relief while the reps that directly report to them are on leave?
For frontline managers, the answer to this question is typically “yes” for reps out on a leave of absence.
However, this will depend on what percentage of their team’s quota the sales manager is held to. If the manager is held to 80 to 90% of the sum of their team’s quota, and the manager oversees a team of 8, the impact of the rep being gone isn’t as high as if it’s a team of 4 reps.
But if they have a smaller team, and one rep being out for an extended period means a 25% loss of potential revenue toward the team target, then the manager will receive quota relief to the tune of that rep’s quota.
As you move up the command in leadership, like a VP of Sales, this relief matters less and less since they are typically held to the financial target number.
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Implementing quota relief
In conclusion, quota relief is a valuable tool for motivating and retaining employees, as well as ensuring fairness and equity in the workplace. Standardize your quota relief policy to treat everyone fairly.
Here are some key takeaways from this blog:
- Quota relief should grant new hires time to ramp up and reach their full potential.
- Quota relief helps reps who are on leave, such as parental leave, to ensure that they are not penalized for taking time off.
- For managers, quota relief ensures that they have a fair chance of hitting goal even if they have teammates out on leave.
Follow these guidelines and make it easier to edit, add, and remove quota relief for your team using QuotaPath. We’ll automate it so that you don’t have to track and change dates while your team is out manually.