Its January. Many businesses are scrambling to issue incentive compensation plans that will both motivate and challenge their sales organisations. As you look to motivate your sales reps, don’t forget what you are designing should INCENT them to sell more, not just reward them for past behaviour. Sometimes its easy to lose focus of that when you get up to your head in cash projections and various modelling, sanity checking and all the other important parts of this process.
First, a recommendation. There is a fabulous book called Game the Plan, by Christopher W. Cabrera, the Founder and CEO of Xactly Corporation. Its a great book for people new to the world of sales compensation and even better for those experienced who want to give a fresh look to the way they approach the topic.
Game the Plan is a must read. Chris Cabrera shows how to use real-life data to create killer incentive compensation strategies that will transform your enterprise’
– Marc Benioff, Chairman and CEO of Salesforce.com
I want to highlight about a few ways you can ensure you are incenting and motivating your reps to sell more.
Incentive or Reward?
If it takes you two or more months to measure and compensate for a specific goal, you’ve created a rewards system, not an incentive one.
– Xactly Corporation’s Christopher Cabrera
It is incredibly important to think about the cadence of your payment. Are you paying months or YEARS later? This likely isn’t driving behaviour and it will be hard for a rep to associate the behaviour to sell that deal with the reward, as too much time has passed. Best practice shows a monthly cadence is the most appropriate, especially for quota carrying sales heads.
Set Reasonable Goals
If a goal is unachievable you have removed the drive to succeed straight off the bat. It is important to sanity check your goals.
- Is the number achievable under the best of circumstances? Has it been achieved historically by a handful of top performing reps (not just an outlier)?
- Have managers goals been adjusted to allow for underperformance and TBHs? The average rep at most companies achieves around 80%, no manager should expect all his reps to achieve 100% for him to hit his goal (more about this in my blog next week)
- Does the pipeline and sales cycle allow for this rep to perform? Is this a new market? How long is the sales cycle? What is in the marketing funnel?
Does your incentive compensation match company goals?
Many of the most experienced designers of compensation can sometimes fail to step back and ask ‘are we incenting reps to sell the types of deals we want them to sell?’ This can be described simply as the following process:
- Identify the company or organisational goals
- Identify behaviour that will achieve those goals
- Identify compensation measures that will reinforce those behaviours needed to meet corporate goals
Note that NOT rewarding bad behaviour is just as important as driving people towards the right behaviour. You should not be rewarding sales for deals that are undesirable to your larger company plan – whether that be profitability, market focus, etc.
Conclusion
Hopefully this has given you some ideas to consider in your planning process. To close, planning is never a once a year activity. You should always be planning so if you have already set your plan for this year, you should always be looking at metrics and measurements that will help you build a stronger plan for next year.
Show me a company’s comp plan, and I’ll show you how the employees behave.
Jack Welch, longtime CEO of General Electric
Compensation design and quota setting is arguably much more important than the automation thereof. If you need help with either or would like to have a chat, contact Sales Ops Help.