Distributing more quota then the annual operating plan is called over allocation. A little bit is okay and a lot is not. The justification for “little bit” is that you will have open territories, new hires, etc. Ideally, that’s about 5%, maybe as much as 10%. What gets uncomfortable is when the company is making its numbers, the leadership is high-fiving, and most individual contributors are missing their quotas and under earning versus their stated target compensation.
This also gets at the fundamental question of whether or not a higher goal actually causes a higher level of productivity. We put mechanics into the compensation plan to give people the extra motivational traction to get up to and beyond the quota, generally in the form of acceleration over quota. If your actual performance expectation is 80% of the quotas you have deployed, then you should have some kind of acceleration at that point, and the acceleration that you have at 100% of quota is out of reach for most (and therefore not very motivating).
Moreover, when you start stating your official productivity expectation as being beyond what you really expect, and stating your target compensation as being more than you actually intend to pay, you start having to keep two sets of books – what you said (the official quota and target comp) and what you meant (what you actually expect people to produce, and what you intend to pay them when they do that). And your salespeople will start to think you don’t understand your own business model and are disingenuous when you tell them what you expect of them and how much you intend to pay them.
It’s also helpful to remember that salespeople (and most people, but especially salespeople) really care about being “winners.” Intentionally setting them up to mostly not meet the officially stated expectation makes morale challenging, and may drive away solid contributors who need both a reasonable income and validation that their contribution is acceptable or better. It’s hard for many people to keep going in a challenging job when the systems in place consistently tell them they aren’t quite good enough.