When employees aren’t meeting or failing to meet business objectives, it’s often because their incentive plan isn’t aligned. Sales leaders find that annual incentive plans can create more pain than desired savings for their organisations. Whether it’s a lack of traction in achieving goals or inadequate incentive plan administration, problems with incentive programmes can range from demotivating to even destabilising a sales team. In this article, I outline six pain points that organisations report with their sales incentive plans, and why RevOps is well-placed to help solve them by becoming involved in the strategy of incentive plan design.
Identifying Pain Points:
1.Misalignment with Company Goals: The most common rationale for revising an incentive plan seems to be misalignment with more overarching company goals. If incentive structures fail to reflect key aspects of a company’s strategy – say, if a company’s goal is to improve profitability but the incentives plan is based purely on top-line revenue – it’s possible that a sales force’s behaviours will respond by optimising for activities that contribute less to building long-term growth.
2. Administrative inefficiency and complexity There can be layers of complexity in the incentive model and the manual processes for tracking and administrating. This requires training for sales teams and operational staff, as well as running reports and merging data, which increases cost and creates administrative burden. It also takes away sales reps’ focus from driving revenue as errors or delays become common, while complex incentive calculations can result in sales reps losing trust and transparency in their ‘total compensation and incentive calculations’.
3.Unfairness and Demotivation: Rewarding sales reps who put in more effort than their co-workers discourages neurotic efforts Those based on equity face the problems of inequity and demotivation. Inequity may result when individual performance is not appropriately rewarded. Demotivation may arise if there is an inconsistency between an individual sales rep’s performance per unit of effort and the way the rewards are allocated.
Addressing Pain Points with RevOps:
1. Strategic Alignment Arguably, the RevOps team is best suited to ensure that key incentive plans are ‘targeting the right things’. The RevOps function understands stakeholders from across sales, marketing and finance, which would allow them to benchmark incentive plan metrics to a broader set of corporate goals and strategic priorities. For example, if the focus for a company is on increasing customer retention, RevOps could develop an incentive plan for sales reps that rewards not just new sales but also upgrades and upselling that already exist within the installed base.
2. Tightened processes: There are some very good reasons why RevOps is also excellent at optimising processes to get things done. Because it relies heavily on technology and automation, things such as the administration of incentive plans can be optimised through ‘readymade’ solutions that help to lower administrative costs and ensure errors. For example, by integrating compensation administration with incentive management, an incentive programme can be easily built on a centralised incentive management platform that can generate commissions on the fly, increasing transaction velocity and giving sellers real-time performance visibility into their earnings, helping them to understand and track them more effectively and efficiently.
3. Custom Incentives: RevOps appreciates that generic incentive plans (eg, a scaled commission) are not the right motivator for all sales reps. Even something as simple as clustering sales teams based on their performance metric (eg, number of new logos, contribution margin) or by territory, etc, allows a RevOps leader to place custom incentive plans in front of individual units based upon their contributions and derived value. For example, some innovative CEOs segment sales teams by individual performance and compensate accordingly with a tiered commission with either increased commission rates or additional bonus opportunities based upon performance. To wrap up, strategic involvement in the incentive plan strategy is exactly what the Rev operations team needs to enable the sales team for better performance through better outcomes. RevOps professionals can provide critical insights to formulate the incentive structures that target the right goals (ie, misalignment with company goals), reduce overhead (ie, administrative complexity), and align them with the needs of each successful salesperson (ie, inequitable rewards). Because RevOps addresses the pain points associated with sales incentives, it provides the structure for strategically aligned goals administered with streamlined processes and personalised rewards to enhance sales performance and positioning in the market.
