Improving the effectiveness and return on the SIP investment is an exercise in co-design that should involve teams with expertise in both sales compensation and sales leadership. Done well, joint ownership of sales compensation programmes creates value by maximising the impact of incentives in terms of both business returns and organisational goals.
Sales compensation plan specialists (those that concentrate on the financial and quantitative aspects of SIPs) focus on making sure that incentives are not only sustainable but also consistent with overall company financial strategy and not creating unintended consequences, like pushing sales that are not in the company’s best financial interest. Sales leaders, those that are in the field, bring additional content to the table, such as what motivates the field, what the marketplace looks like for sales, what the customer centric view is of why they would choose to use you.
For instance, a firm might want to grow market share in an industry with many competitors. The head of sales might suggest a cash bonus for every new customer or client signed on, with the expectation that, barring competitive behaviour, the aggressive growth desired will be achieved. The compensation team at the firm, on the other hand, could research the direct cost implications and advise creating an incentive structure with an escalating reward plan that targets new customers’ profit margins, ensuring that the programme promotes durable growth not simply outsize volume.
Or perhaps more sales are needed to promote a new product line, and the sales leader pushes for a high commission rate to concentrate effort on the new product. Then, the compensation team might evaluate this in the context of total sales needs, making sure that this new incentive doesn’t cannibalise sales of existing products, or cause the budget to go over in the coming year. Together, the team might design a plan that will encourage the new product while maintaining revenue stability.
Ultimately, sales compensation teams and sales leaders must partner to create SIPs that are motivating to sales teams and financially and strategically focused on the company. This ensures that incentive plans are sustainable over time and aligned to company KPIs.
