Guide
May 14, 2021
Xactly User Conference May 20-22, San Francisco
Turnover and open territories are a sales reality. Learn how to plan and react to plan fluctuation in the modern era of sales.
You have carefully constructed balanced territories, created a compensation plan with quotas that roll up, and sized the sales team to match. As has been said of sales and combat, no plan survives first contact. Suddenly, a rep leaves – what happens to the quota? What happens to the open territory? Are your carefully crafted plans for the year useless?
They don’t have to be - as long as you’re planning for the realities of modern sales. One of those realities is sales churn, which means that territory management requires contingency planning for open territories.
Reactive Territory Coverage Models
The methodologies for covering an open territory generally fall into two categories: absorption and babysitting. Under the absorption methodology, accounts are reassigned and the territory simply disappears. This methodology requires a complete reassessment of account assignments and quotas, and there may be severe capacity restraints that prevent you from just giving more accounts to the existing sales team.
The babysitting method relies on temporary stewardship over the open territory until a new sales rep is ramped enough to take over. This methodology requires two things: careful selection of a temporary steward who has enough capacity to oversee the open territory, and the design of a compensation structure to ensure that the proper amount of sales time is spent covering the accounts in both territories. The selection of which methodology to use largely is dependent on the anticipated amount of time required to staff the open territory with a fully ramped resource.
Under the absorption methodology, the accounts in a territory are reassigned to other sellers. So, how do you allocate the accounts to the remaining members of your sales team? There are multiple methods to do this, but the most popular include:
- Closest coverage – when there is the need for a physical presence by a rep, it makes sense for those closest to the vacant territory to absorb it. This can create abnormally large territories that most often need to be cut up again in the future.
- Preferred Rep coverage – a highly-skilled rep is asked to “triage” the territory to maximize the probability of saving the most accounts. This is often not possible as the highly skilled rep may lose accounts in their existing territory if they are asked to cover an additional one.
- Available Capacity coverage – a rep that has been stuck in a saturated or low potential territory will be asked to absorb the accounts. This often creates territories that have accounts thousands of miles apart.
- Round Robin coverage – accounts will be reassigned randomly to the existing sales team, usually for remote coverage. This often creates higher client churn risk if on-site interactions with customers are needed, but it is usually seen as fair by the sales team.
The babysitting model can use the same methodologies as above, but the key difference is the temporary nature of the account oversight. Because of this, other methodologies can be used:
- Manager coverage – the manager oversees the vacant territory as a way to motivate both retention (quotas roll-up) and rapid hiring of a qualified resource. This method usually does not require changes to the compensation plan as the manager is already motivated to make the territory achieve.
- Rotating coverage – not often used, this method rotates the coverage amongst a group of sales reps based on capacity. This is used when reps have lumpy sales or specific timelines for project-based sales and there are those who have blown through their pipeline and have the ability to shift their coverage. This method requires complex split rules for deals in flight in the open territory that needs to be handed off.
Dealing with Flucuating Quota Assignments
The next decision that needs to be made is whether to assign the full quota inherited with the account to the covering rep, as it can have serious implications on overperformance pay. If the full quota is not inherited, then what happens to the roll-up? The first place to look is usually at the amount of over-allocation in the quota setting. If there was over-assignment, it may be possible to give partial quotas to the reps inheriting the accounts.
If there is not enough slack in the quota overallocation, then one of the key drivers behind the revised quota setting methodology should be the amount of time the rep(s) are expected to maintain the inherited accounts. When there is long-term maintenance, and it is expected that two territories will be merged or maintained for an extended period (over one year), the rep should inherit the quota of the maintained territory. The rep’s incentive pay should be re-evaluated and increased to compensate them for the increased responsibility.
When there is temporary maintenance (as would be the case for the babysitting model),. then there are a number of ways to tackle quota, and the method chosen is largely dependent on the situation.
- Separate quotas – If there is a significant amount of time required for onboarding but less than a full plan period (i.e., under 1 year) then the rep can be given a separate measure as a plan addendum with a bonus often equal to the full amount of incentive attached to the territory for achievement of quota
- No quota inheritance - If the maintenance period if short-term then the rep can be given a separate measure (SPIF) with a bonus attached for achievement of sales milestones (quarterly quota)
Territory management is highly integrated with sales compensation design, sales sizing and productivity expectations. Changes in your territory management design will most likely have an impact on other aspects of your sales plan (the overarching plan that incorporates the go-to-market strategy), and a scalable approach and systems structure is required to test the different approaches to arrive at an optimal outcome.
