AT A GLANCE
- Rewards and penalties play a large role in motivating sales employees.
- While sales incentive programs have become a commonplace of the business world, not all of them achieve their goals.
- Most common pitfalls follow a similar trend. Luckily, there is a blueprint for success.
Companies have been increasingly focusing on sales incentives to boost their performance in the increasingly competitive markets. Experience and research tell us, however, that not all Sales Incentive programs achieve their goals. Any successful Sales Incentive program requires an exceptional understanding of both the business environment and the fundamentals of Sales Incentive Design.
Özcan Kukner, the Business Development Director at Maven Insights, says a blueprint on effectively designing and implementing an effective Sales Incentive program exists.
Özcan has been in the consulting industry for over 15 years. He specializes in strategy implementation, corporate performance management, and operational & organizational improvement. He manages the overall business development activities of Maven Insights. Özcan acts as the regional business development director and as an SME in multiple subjects, overseeing its sales operations and leading critical engagements.
HOW CRITICAL IS IT FOR A SALES ORGANIZATION TO REWARD ITS EMPLOYEES?
As communication technologies develop and various sales channels become more accessible, the sales force becomes increasingly crucial for a company’s success and competitiveness. So, driving the correct behaviour and efficiency of sales employees is paramount to realizing a company’s financial goals.
Rewards and penalties play a large role in shaping human behaviour in both social and professional life. That applies doubly for motivating sales employees to ensure a company’s commercial success in any competitive market. Sales incentives enable companies to align their total success and their sales teams’ achievements. That creates a win-win situation where the sales employee’s commercial achievement directly contributes to both his or her earnings and the company’s financial success.
Sales incentives have become such a critical and integrated part of the global sales culture. Studies conducted within the developed markets have shown that more than 50% of companies prefer a sales incentive plan to a corporate bonus for their sales employees. Similar studies have shown that notably higher use of incentive plan structures among high-performing organizations among the surveyed companies.
“Studies show that more than 50% of companies prefer a sales incentive plan to a corporate bonus for their sales employees.”
BASED ON YOUR EXPERIENCE, WHAT DO SALES ORGANIZATIONS STRUGGLE WITH THE MOST? WHAT’S LESS THAN IDEAL?
While sales incentive is critical for a company’s financial success, a poorly designed incentive plan could drive incorrect motivation, thus having a significant adverse effect on its performance.
Based on our experience, the most common pitfalls follow a similar trend. We group them into three categories:
- Lack of alignment among performance criteria and corporate goals
- Fairness not being a significant driver for the sales incentive
- Not taking into account the business environment when designing the targets
For example, let’s imagine a company, which requires a strong cash flow. If it incentivizes sales revenue only, it won’t drive the correct behaviour. Instead, it should integrate the quality of sales into the incentive.
Similarly, in situations where a significant salary gap exists among tenured employees and others, developing incentive rewards on basic salaries might not always reward the top performers.
Finally, setting the same financial target for all employees without considering geographical and market reach could create a resentful environment and unhealthy competition within the sales force.
Ideally, before designing sales incentives, a company should identify the guiding principles that define the desired sales behaviours and align the entire organization accordingly. Otherwise, the company would face obstacles while deploying its sales incentive programs.
WHEN DOES A COMPANY NEED AN INCENTIVE MECHANISM? AND HOW WOULD IT KNOW IT NEEDS ONE?
Any company that operates in a competitive market above a specific size should consider employing sales incentives instead of a corporate bonus.
“Any company that operates in a competitive market should consider employing sales incentives instead of a corporate bonus.”
That is especially true if the company’s market has multiple local and global competitors and if the company’s products do not have unique advantages compared to its competitors’ offers.
WHAT SHOULD BE THE FIRST STEP OF A COMPANY THAT WANTS TO IMPLEMENT AN INCENTIVE PROGRAM?
Experience has shown us that a clear understanding of the business environment and the corporate strategy should be the starting point in designing a strategically-fit incentive program.
“Experience has shown us that a clear understanding of the business environment and the corporate strategy should be the starting point in designing a strategically-fit incentive program.”
Next, clear incentive-design guidelines and the identification and selection of best-fit sales incentive components should follow. For the sales incentive program to work, the sales environment and the company’s strategy should be aligned.
Upon completing the design, one must develop the accompanying incentive policy, incentive governance, and a clear incentive communication plan to ensure the effective implementation and management of the incentive program.
Excellence in managing and operating the designed sales incentive program can be attained through implementing and integrating a competent sales incentive tool. That would enable the rewards team to effectively manage, modify and enhance the incentive program based on the upcoming business requirements and market dynamics.
HOW COULD MAVEN INSIGHTS HELP COMPANIES TO BUILD AN EFFECTIVE INCENTIVE PLAN?
As the Maven Insights team, we’ve been supporting mega-corporations in designing, implementing, and operating effective sales incentive programs for over a decade. We combine global best practices with our expertise and regional experience to design a solid sales incentive framework, which we then customize based on our clients’ specific business needs.
“We combine global best practices with our expertise and regional experience to design a solid sales incentive framework, which we then customize based on our clients’ specific business needs.”
Furthermore, we provide all aspects of an effective sales incentive program from A to Z. We start by identifying the business needs and the company’s strategic goals collaboratively. That allows us to implement the necessary toolkit and governance modules to launch and operate the designed program successfully.
Additionally, -if the client requests it- we implement and operate the incentive program for our clients to ensure that it is brought to life effectively. That enables us to assist and guide our clients throughout all aspects of their incentive program journey and act rapidly to implement any required enhancements on the spot.
Finally, irrespective of where they are at on their incentive program journey, a client could always ask us to get engaged. Because we integrate a robust handover program into our services to guarantee effective knowledge transfer to our client.