4 min read
Sales Incentives are key to motivating reps and driving revenue. However, it is difficult to strike a balance between setting them up effectively versus using the right solution to set them up. More often than not, the more you veer away from the latter one it leads to a drop in the effectiveness of an incentive plan. A good incentive plan is only effective on paper if it’s not implemented the right way. Below are few tips you may want to consider while buying a good IC solution.
As per Gartner, incentives/commissions are overpaid by around 8% on average. This can be a combination of complex incentive processes and the inability of solutions to accurately calculate them. If you are a 100 person sales team and are paying $20k per year as an incentive it translates into $160k of overpayments made. This is a huge amount and organizations tend to ignore this math and end up shelling more while trying to save on costs spent on solutions. Keep in mind that the point here is not about choosing a costly solution, it is about putting the math together and understanding how much damage you are potentially exposed to. It is of utmost importance for organizations to focus on the accuracy of payouts and it is not necessarily always an overpayment; it can be an underpayment too which may hurt them even more as it can lead to employee attrition.
One of the key reasons to buy a solution is to ensure the reduction of manual efforts of the team. A solution should be intelligent and flexible enough to integrate with upstream and downstream CRMs like SAP, Salesforce, Workday, Microsoft Dynamics, and a range of other tools to ensure sales operations, finance, and HR departments don’t end up being bottlenecks because of their unavailability to feed information into the system. Moreover, manual uploads open up possibilities of manual errors which may lead to erroneous calculations of incentives, delay in the calculation of incentives, and potential delay of crediting them to sales representatives’ accounts.
Incentive solutions have evolved from being commission calculation engines to dispute resolution, quota setting and management, qualitative MBO management, reporting systems, and analytical dashboards. Layers of complexities have increase multi-fold and there is a clear need of connecting the experience with a clear customer journey. At no point would you customer/end-user feel disconnected eventually relinquishing the thought of ever logging in again. It is the WOW factor that brings them back and keeps them hooked up with the solution. You, as an organization should choose a solution that is easy to use yet is capable enough to cater to your core requirements.
Incentive programs are not designed on a piece of paper or on a whiteboard in a room. There is extensive field research going in behind it. In the current situation, research outcomes are bound to vary quarter over quarter and those need to reflect in your sales incentive plan. Failure to do so may lead to sales reps not hitting their quotas which may eventually lead to dissatisfaction and an increase in attrition. A good solution needs to be nimble with a minimal change management turnaround time and the ability to implement the most complex incentive plan changes.
As an organization, are we paying for performance? This is a very important question that is often not asked or a thought not pondered upon. Organizations live in delusion about their incentive plans assuming them to be the best. As organizations grow, it becomes increasingly difficult to monitor and be on top of these metrics. There are simple ways of doing it where-in incentive payments should be evaluated for the 10th and the 90th percentile and compared against the target payout amount. There are few other examples like these where-in organizations should be aware of basic information like the top and bottom performers, quality of quotas, etc. As simple or complex as it may sound, it is not done. Being on top of these metrics helps you evaluate and assess your overall Incentive plan and devise a strategy to update it to be in favour of the field force.
These are some other things that you should consider. The above checklist is not necessarily the most perfect one out there. There are other criteria too that would be more organization dependent; something like information security and multi-country scalability. However, these are good starting points if you are looking to start up and move away from legacy or spreadsheet-based solutions.
Sumeet has 15+ years of experience in incentive compensation management, goal setting, salesforce effectiveness (SFE), and process management with leading sales performance management organizations like Optymyze (formerly Synygy) and others.
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