Sales Performance Management is a term that has evolved over the past few years to describe the process of measuring and rewarding sales performance. In the past, similar industry terminology such as Sales Incentive Compensation Management (ICM), Enterprise Incentive Management (EIM), and many other acronyms were popularized by consultants and practitioners to describe the same fundamental process of measuring and rewarding sales achievement. Practitioners using the term Sales Performance Management typically refer to three keystone elements to the process;
- Territory Management - The scope of responsibility
- Quota - goals and targets
- Sales Commissions and Incentive Compensation Management - Timely and accurate feedback in the form of calculated performance achievement, earnings & reports.
Today we focus our discussion on Territory Management, define it, and discuss what it takes to manage this critical link in the Sales Compensation process. A key question to start with is what do we really mean by Territory Management and why is it important?
Territory Management is all about defining the scope of responsibility and more importantly, being able to take action with that knowledge. From a systems perspective, this involves several interconnected activities that begin with defining the scope of responsibility for everyone in the sales organization and ends with a set of credited sales transactions that are ready to be fed to the compensation plans to calculate achievement, earnings, awards, etc.
- The starting point for this process is importing and managing the sales data for a performance period. (aka Data Management) The end result of this vital step is a set of sales transactions that can be then be analyzed to see who should get credit for each transaction.
- Processing sales data so that responsibility (aka sales credit) is assigned to each sales transaction in a manner which is consistent with each contributor’s responsibility is the next link in the chain. Sales reps who are assigned to key accounts should get credit for sales to those key accounts; reps who are assigned to geographic territories should get credit for sales into those territories, etc.
- From a system standpoint, this implies that hierarchies of each of those lines of responsibility that are being assigned within your sales organization ( key accounts, product lines, sales regions, etc.) must be easily maintained so that they can be integrated and managed within the sales crediting process.
- Positioning each contributor in a hierarchy in the context to their peers so we can not only visualize how a broad organization fits together, but also provide the Sales Commission Management system with context from a data management perspective.
- For example, often we want to provide a sales professional with information that is pertinent to their role. Sales Managers and executives will have a different, broader, set of data that will be pertinent to their role. It is the organizational hierarchy which helps us put these pieces in place so that a system can instantaneously provide each contributor with personalized and secure information that reflects sales activity for which they have responsibility.
Sales organizations across industries organize themselves in unique ways that reflect each company’s particular strategy. We often see two companies competing in a similar market to each have completely different strategies and sales organization designs. This has direct impact on territory design, in one case the territories may be based on geography (states, zip codes, etc.) while a competitor is based on key accounts.
As you can see above, when we think of territories through the lens of sales responsibility, the process of managing data and assigning credit to sales transactions throughout the sales hierarchy has to be viewed as a cornerstone of territory management and a vital element of Sales Performance Management.
We would be remiss if we did not mention that there may be times when you will want to dive deeper into the assumptions, design, balancing and optimization of your sales territories. While often not integral to the monthly sales comp cycle, it is critical to get this right and there is help out there for those who want to take this deep dive. Our friends at TerrAlign can help guide you through this process and would be happy to discuss this option with you.