You know the old adage, “We need the right people on the bus, in the right seats, at the right time”? Having worked in tech startups for the past decade, it’s true, a version of this phrase gets thrown around A LOT. I suppose that’s why I applied the term adage to it. When everyone’s not set up for success, the whole bus is in chaos. And I’m talking bus full of elementary school students on early release day before Christmas break kind of chaos. Let’s restore order to your bus, er, compensation and sales territory plan.
Sales territory planning allows you to allocate sales reps and resources to regional groups of prospective customers to maximize performance and boost sales. For your territory plan to be most effective, you should structure your sales compensation to support it.
Proper alignment between compensation and your sales territory plan means:
- All territories have healthy pipelines.
- Each territory is supported according to their specific needs.
- Quotas are in line with sales opportunities.
- Sales reps are motivated to perform to the best of their abilities.
- Teams are empowered to generate leads, secure customers, and drive revenue.
By contrast, poor alignment in these areas means:
- Sales reps aren’t properly incentivized.
- Attrition rates may increase.
- Employee satisfaction levels will decrease.
- Overall performance will suffer.
But what causes poor alignment, and what can you do about it? Let’s take a look.
Causes of poor alignment between territory planning and compensation
When sales compensation and territory planning are not well aligned, performance suffers. We’ll examine a few of the most common ways this can happen.
Quotas fail to account for opportunity in each territory
Different territories are not equal in the sales opportunities they present. Depending on factors like the number of customers, customer preferences, and the size of a given area, it will be far easier to make sales in some territories than others, and your quotas need to reflect this.
If your sales reps in Pennsylvania have the same quotas as your reps in California, it’ll likely cause some problems. With such wildly different demographics and population sizes, there will be little to no chance for reps in each territory to have equal opportunities.
And when reps can’t make the “napkin math” work—when they don’t see a viable path to meeting their quotas—their morale and performance suffers. Because they lack motivation, they’ll close far fewer sales than they would have with a more reasonable quota. On the flip side, setting quotas based on the lowest-opportunity region will leave sales on the table.
Pipelines differ between territories
Even if territories present otherwise similar opportunities, they may still differ in their pipelines. This is often the case when first expanding into a new territory where there simply hasn’t been as much time to build out the pipeline yet. It can also happen when your customers across territories have different preferences in sales cycles and deal sizes. Local competition can also affect your pipeline. And even regulatory pressure can differ by region, affecting how you’re able to operate.
Any of these elements can contribute to different pipelines that impact how much your sales reps are actually able to sell. And if you don’t adjust your quotas accordingly, you’re going to run into issues of fairness in compensation.
Sales reps’ personalities aren’t a good match for the territory
In some cases, the personalities of your sales reps may mesh better with the customers in some territories than others. For example, you might want sales reps in Boston to be more direct and transparent, or you might want sales reps in Silicon Valley to be tech focused and adept at selling over Zoom calls and emails.
This is one reason it can be helpful to perform personality type tests to identify the various personalities on your sales team and the strengths and weaknesses that go along with each. If some reps simply aren’t a good fit for a given territory, moving them to a region where they’re better suited may help to improve their performance.
How to improve alignment between sales comp and territory planning
Improving alignment between territory planning and compensation means examining sales data to determine the problem, then making necessary adjustments. It might mean changing your compensation plan, your territories, or both. Here’s how to do it.
Investigate the cause of your misalignment
When some territories consistently hit their quotas, and other territories struggle to keep up, the first thing you need to do is figure out why.
In many cases, it’ll be one of the causes we discussed above, but it could also be as simple as having a few all-star reps in certain territories that inflate their overall ability to hit quotas. Or you could have a few particularly poor performers who are dragging the rest of the territory down. Or perhaps there was a temporary setback localized to one territory.
You need to know the cause before you can address it. And that means looking at your sales data. Ideally, you’ll have been monitoring and tracking your sales performance in enough detail to determine the issue. You should be able to identify your best and worst performers, see which territories have the most leads in their pipeline, spot bottlenecks in the sales process, and more.
But to do this well, you’ll need a dedicated solution—like Performio’s ICM software—to give you real-time access to current performance, and to analyze past sales data for insights.
Make adjustments to sales compensation
Depending on the findings of your sales data analysis, you may be able to improve alignment by making adjustments related to your sales comp plan.
This will frequently come in the form of quota relief—especially in cases where there’s been a temporary setback. For example, many organizations recently offered quota relief to their reps in Florida due to the hurricanes affecting the area. Such external factors are beyond anyone’s control and don’t reflect a territory’s true performance under normal circumstances.
In other cases, there may be a more fundamental mismatch. Perhaps there’s an unreasonably high quota for a territory with limited sales opportunities. Lowering the quota to a more appropriate level would help improve morale and boost performance.
You can also look at the individual components of the comp plan to determine whether some sales activities have been over- or under-incentivized.
Make adjustments to the territories
Your sales data analysis may point you to necessary adjustments regarding the territories themselves. In more extreme cases, it could mean merging small territories, splitting up large territories, or shutting down unprofitable territories altogether. But more commonly, you can make smaller changes to better support struggling regions.
For example, you might increase your ad spend in a region that’s struggling to get a foothold, giving reps a better chance to improve their pipelines and get more leads. You could look at moving reps around based on where their personalities would be a good fit. Or you might put a more seasoned business development representative in place to get your leads flowing properly.
Again, you’ll want to examine the sales data to determine the root of the problem, and then make adjustments to directly address that problem.
Gain crucial sales data insights with Performio
With Performio, our software gives you a start-to-finish look at your sales data, producing valuable insights at every step of the way. You’ll see which leads have the best conversion rates, which sales reps are securing the most customers, which methods are the most effective, how each territory stacks up next to the others, and how all of it comes together to support organizational objectives.
And building or changing a comp plan is easy. No need to sort through rows of data in spreadsheets, modify individual copies, and hope there are no errors. Just make the necessary changes once, and the new plan will be automatically distributed to your sales team to accept and sign electronically. This ensures that whenever you need to make changes, your incentive structure can keep in step.
Ready to see what Performio can do for your business? Request a demo today.