Finding the right sales incentives is critical to building a more effective sales organization. But regardless of the incentive system you have in place, there are things management can do to injure its effectiveness.
Let’s review three of the worst sales incentive policies I’ve seen. They are:
- Capping incentives
- Treating all salespeople the same
- Not measuring and adjusting over time
The idea behind capping incentives is short-sighted, and goes something like this. “What if Salesperson X gets all these sales, that will mean we have to pay him all this cash. Let’s put a maximum on the amount we have to pay so we can save on the cost of this program.”
It doesn’t take much time to recognize the flaw inherent in this solution to a problem we should all be so lucky to have. If Salesperson X gets all those sales, those sales equal revenue for the company. So long as the incentive structure is built in such a way that the company profits from the sales after the incentive, there’s no reason to cap it. All capping it does is tells Salesperson X and the rest of your sales team not to work so hard.
Treating All Salespeople the Same
No two employees are the same. And we should not expect them to respond to incentives in the same way. Nowhere is that more true than in sales.
Your high performers might need different incentives than your more average salespeople. New hires might require more support and therefore a different set of expectations than more experienced staffers. People selling different products or to different client types might see starkly different performance.
Your incentive structure should be flexible enough to allow for these kinds of differences. The key is clarity and fairness, not rigidity.
Not Measuring and Adjusting Over Time
Putting an effective incentive plan in place for your sales organization is a time to “Set It and Forget It”. Just like most other marketing practices, it is important to continually optimize the incentive structure over time. Test until you find the one that leads to the maximum benefit for the company and then monitor it for staleness or slippage over time. You may need to inject a little excitement every once in a while if you have a sales team that gets used to the status quo.