Today nobody wants to score a C for a sales incentive plan, Like a finely tuned orchestra, organisations should be able to score an a Economic reward, recognition and strategic alignmen which are the ingredients for setting the rhythm that delivers a vibrant symphony of profitability. Empirical evidence shows that the return on sales is 8 to 10 times higher than the return on capital investment. Even slight improvements in management practices for sales managers and salespeople deliver material returns. Targeting incentives to the right outcomes is the key to better returns. We want to help you better compose your incentive orchestra, and improve your returns.
The Overture: Strategic Alignment
If your sales incentive plan is a symphony, you must first determine the melody you want to create; should the company produce the thunderous crack of market dominance or the softer and more subtle sympathetic resonance of customer loyalty? If the stage has a large market dominance goal, perhaps a new software company has just introduced the mother of all products and there is a 20 per cent increase in market share for the company that is set to benefit. The tune to be played might call for commissions to be adjusted to ‘tune’ sales builds in the appropriate market segment.
The Crescendo: Clear and Transparent Metrics
Sitting in the centre of resistance lies the clarity of metrics. The music of metrics being played guides the musician like the sheet music of a song. A salesperson needs to have the same clarity on material rewards, so they see the link between their actions to the notes being played through revenue targets, customer-acquisition goals or product-specific benchmarks. A medical device company has a plan in place that provides tiered commission, depending on whether a salesperson sells one or multiple of a new diagnostic machine.
The Interlude: Flexibility and Adaptability
There is a similar analogy with a good conductor, who adapts to the whims of the audience. Similarly, incentive plans need to adapt to markets as they change so organisations that manage to tap into the subtle cues of changing business conditions can tune their plans and maintain resonance. Picture a retail behemoth sensing the coming of the digital tsunami and quickly revamping its incentive plan to strongly weight e-commerce results. This allows the sales team responsible for the KPIs to readapt, and hence play in tune with the needs of the changing digital market.
The Finale: Balancing Short-Term Wins and Long-Term Sustainability
A good sales incentive plan is not a one-hit-wonder – it’s a composition that lasts. Short-term gains need to mesh with long-term sustainability in order to create a melody, not a chiming tune. Now let’s look at the insurance company. The company tries to achieve a measure of balance between short- and long-term targets by using three types of incentives: short-term bonuses for meeting quarterly goals, a long-term incentive (in the form of performance-based bonuses linked to year-to-year growth), and a middle-of-the-road incentive in the form of commission-sharing bonuses for hitting certain thresholds. Salespeople are incentivised to strike a balance between short-term success and longer-term results.
If the song of business is sales, and the rhythm of sales is profit, then the symphony of profitability is the mastery of incentive plan design. When you make incentives and quota metrics match your business strategy, when you keep measures as clear as you can, when you offer the flexibility salespeople need, and when you balance your impulse to maximise short term results with the discipline demanded to assure long-term profitability, then you have composed a theme that will ring in the marketplace and long-lastingly affect the behaviour of your sales force. For those involved in designing sales incentive plans, we will continue to compose our melodies in the hopes that our harmonies continue long into the future.
