Sales Incentive Compensation Management: 3 Things Sales Leaders Need to Know
Have you ever thought about why sales team motivation & overall sales effectiveness may not be that great even if you would have been using smart and innovative sales incentive programs for them?
We have been studying the sales incentives market for some time and most of us would agree that the higher is sales performance, the higher is the sales achievement of the organization. But many sales reps will land leads below sales targets and we say that they are not motivated enough. However, the sales leaders or the HRs would say that they have created the best sales incentive compensation programs.
If your sales rep’s performance is not up to the mark even after introducing an excellent compensation management functionality, you have to rethink your incentive plans for optimal performance.
Let us break the news to you, it’s all about Psychology. Once you follow the simple yet powerful psychological hacks to improve incentive plans and sales performance management, you get positive results.
After studying and guiding organizations in rolling out effective and rewarding compensation plans, we have handpicked three powerful tips for you which will help you to make the most out of your sales compensation program and sales strategy.
1. No visibility of incentive compensation earned by sales reps:
Around 99% of the sales organizations are not using any incentive tools within the sales process for sales enablement, which can give a real-time view of the KPI/goals achieved and incentives earned by the sales executives.
And there is a famous phrase: Out of sight, out of mind!
Incentives/commissions are given to show the right behaviors and encourage the sales reps. These right behaviors are not reinforced if achievement data w.r.t sales targets are not in front of the sales team every day, whenever they want. Not many sales professionals will make efforts to get this data from the internal sales operations team. And this will affect the sales cycle. Many sales reps might start executing shadow accounting, jeopardizing management incentive plans and organizational performance.
Tip 1: Use tools to enable sales executives to have a view to real-time data of their incentive achievements against their sales goals and it should be easily available to the entire sales team. Robust sales compensation software comes with advanced analytics and real-time data helping both the sales leaders and sales representatives track their performance and compensation payout.
Make sure the entire team sees what they have missed out on their sales performance incentive by not achieving the set quotas of the relevant key performance indicator.
2. No reinforcement of what they missed:
Imagine if you stop telling your kids what they are missing if they are not focusing on the given tasks, will they really improve? The answer would be a big no.
It’s a common human tendency and a universal norm. Be it, kids or adults, everyone responds to the loss rather than gain. So, if the sales manager is unable to show where exactly the salespersons have missed on required sales projections and because of not achieving their sales quotas they could not earn a particular amount of cash incentives, there is no reinforcement of better performance with the salesperson in question. They don’t have any visibility on how they are performing with respect to the overall sales department. If they have known that they are making less than other salespeople, they would be putting in the additional sales effort.
Tip 2: Make sure the entire team sees what they have missed out on their sales performance incentive by not achieving the set quotas of the relevant key performance indicator. When they constantly see they could have earned more, they will put in higher efforts resulting in the overall increase in sales performance.
3. One single incentive scheme for all:
Different types of performers would need different kinds of motivation. In one of their famous articles published in Harvard Business Review, Thomas Steen Burgh & Michael Ahearne have talked about the need for different types of sales incentive schemes for managing sales personnel who are Stars, Core performers, and Laggards.
Even your different lines of business should have different sales metrics for measuring sales effectiveness. The more the individual salesperson is performing on the company’s set success metrics, the more commission that salesperson should get within the incentive compensation plan.
Don’t follow OBOR (One Business One Rate) but follow DESI (Differential Employees Segmented Incentives) for building effective sales productivity.
Tip 3: Have differential sales incentive schemes for different sets of people to drive each performer optimally. It’s more sniper shooting than mass bombarding.
Remember to be swift with your sales incentive scheme whenever market dynamics change, which means you should be quickly able to tweak your incentive programs if market conditions change. For example, if there is a new competitor entering a particular segment of a particular region, then you would need to keep your market share constant. You would have to quickly (maybe the same day) change your incentive policy to enhance your sales incentive plan in that particular region, segment, or bring in new sales metrics altogether. If you wait for even a month before executing your sales compensation plan, you would lose as your competitor would have made inroads in your market or even worse, even poached your core performers, who would not know about your great future plans.
Bonus Tip: Change your incentive scheme immediately with a change in market dynamics. Do not wait as each passing day will make things tougher for you.
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