A great sales incentive plan is, in part, a balancing act. On one side are the rewards that energise teams. They nurture the spirit – encouraging, motivating and lifting the mood. On the other side are the goals the company wants to achieve – higher profits, longer-term growth, wider market share, greater reach. Ideally, an incentive plan will sustainably achieve both. It aligns the spirit and focuses the mind on collective and shared goals, in such a way that the outcomes are actually changed. Here’s how organisations can design this plan.
1. Align Incentives with Profitability Goals
In this way, incentives create behaviour that leads to greater viability and profitability. So if you are lucky enough to be in a position to impact incentives, it is critical that you align them with higher-margin product and service categories. Perhaps your organisation sells software. You pay your sales reps on commissions. In order to create a focus on sustainable growth, you could push everyone to sell more recurring revenue by commissioning recurring revenue as opposed to one-time licences.
2. Incorporate a Mix of Metrics
Of course, hitting sales numbers is important – but a narrow fixation on revenue itself can cause other equally important things (such as customer retention, cross-selling, or margin improvement) to be ignored. For instance, by focusing on customer satisfaction metrics as well as sales volume, a telecommunications company might encourage reps to bring in not just new customers, but to serve them in a way that inspires greater loyalty and, ultimately, more profit.
3. Design Simple, Transparent Plans
A complex incentive plan can demotivate sales teams. Reps should essentially have an equation in their heads: ‘If I do such and such, then I will receive X dollars for Y months.’ By revising its plan to involve how many net new accounts and patient referrals each rep brought in during the quarter, a health-care company made it easier to track and stay
4. Utilize a Tiered Structure
A two-or incentive scheme may work for both medium- and top-performing individuals. Good and excellent results can attract bonus payments equal to 100 per cent, 120 per cent and 150 per cent of the agreed target. When a big consumer goods organisation implemented this approach, they reported how reps strived to beat even their last set of targets, with the company benefiting from a strong uptick in profitability.
5. Continuous Review and Adjustment
Conditions in the market change, and so incentive plans must likewise change. Without careful, frequent review, plans can quickly fall out of sync with the fast-moving industry. One SaaS company tied the frequency of adjustments to those market conditions, adapting their plan quarterly to match to the mix of market forces and competitive reactions, and so keeping the Seller motivated while maximising margin at the same time.
With these best practices, incentive plans can be designed that provide a win-win for the company and for sustained organisational sales team motivation.
