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To the company, the main problem is knowing where to set the quota. If the quota is set too low, salespeople may not be as ambitious as they should be. They might relax once the quota is reached and not sell as much as they otherwise would have. On the other hand, if the quota is too high, it can be demoralizing. No one will feel like they can reach the quota and they will feel like failures perhaps before they even start. In both cases, the firm is harmed because sales are lower than they might otherwise be.
For the representative, the main problem has to do with morale. Representatives, as mentioned earlier, may well feel that their quotas are too high. They may feel overwhelmed. This can lead to lower sales in the short term and/or to quick "burnout" which leads them to have to quite their jobs.
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