What sales incentives help drive good sellers to be the best? What does good like and how do you keep sellers motivated? These are some questions all sales leaders ask themselves.

Sales reps are motivated by a clear line of sight between their performance and pay. The key is to have both an ongoing analysis of their historical performance and a comprehensive personal sales forecast. But what happens if their forecast and quota success don't align with the compensation payout? What if they're earning less than they feel they deserve? This confusion can quickly erode trust and overpaying low performers can damage the motivation of the rest of your team.

Overall, the goal for sales organizations is to reward their best salespeople and inspire underperformers to strive for better. So, how do you recognize your best performers and incentivize those who need to improve?

The traditional way is with a sales incentive program.

Getting aligned on your sales incentive plan

To get the best out of your team, your incentive plan should be controllable, measurable, and aligned.

For a seller to understand how a sales incentive plan affects them, it needs to be controllable. Sellers should understand what is expected and align with sales goals that are fair and attainable, yet still require stretching to achieve.

Next, to ensure a plan is measurable, it should demonstrate clear and effective communication of sales incentives and provide ongoing visibility of sales results to sales teams. Regular reporting on seller performance is also important to ensure that sales trends and overall sales direction are easy to action.

Lastly, it’s important to connect the strategic business objectives with the sales organization. Any sales incentives plan must drive the business' performance but also align with the key objectives of the sales management team.

The bottom line is don’t over-engineer it – simplification is key. Stick to three or fewer sales measures to give sellers a clear focus. When it comes to driving performance and measuring against targets, fewer objectives deliver more in the long run.

The four ways to measure performance to inform sales compensation

Traditionally, there are four measures when it comes to looking at performance to inform sales compensation: financial/production measures, strategic measures, input and activity measures and subjective/judgment measures.

1 Financial/production measures

A sales incentive plan for direct sellers should have at least one financial or production measure, and it should be the focus for the seller.

Typically, financial/production measures are core to most incentive plans. They focus on sales dollars, margin or units, and most often measure volume. You should tie any targets directly to the organization's financial success, including gross profit, net profit, billed revenue, contract revenue, total billed revenue, etc.

2 Strategic measures

What are your strategic priorities? Do you want to retain customers and improve customer service? Improve overall sales quality? These drivers usually go hand-in-hand with monetary measures and are often of high value to the business. If a plan has a financial/production measure, it’s common to see a strategic goal that helps drive overall revenue or production.

3 Input and activity measures

You should also focus on your sales professionals' activities and milestones. To do this, it will be important to understand what actions they are taking day-to-day. Ask yourself: “How many qualified leads have they generated?” or “How many sales conversations have they had?” You can add this to the incentives plan when you have significant milestones to hit.

4 Subjective/judgment measures

If you have defined a set of behaviors that you want your sellers to demonstrate or personal development objectives for individual reps, you may want to add this to your incentive plan. It is important to keep in mind however that the softer, less quantifiable skills are one of the most challenging areas to measure, and as a result have the least weight in the measurement hierarchy. As a result these measures should be used sparingly and only as a secondary or tertiary part of your incentive plan.

“Getting all the checks and balances in place at the start will guarantee a plan that rewards and motivates your top sellers.” - Joseph DiMisa

Sales incentives plans: Timing is everything

So, you have a carefully constructed, clear and agreed upon plan. Your people know what you expect from them and how they earn their incentives. Now it’s time to ask yourself: How often should I be measuring performance?

Regular check-ups against sales targets are valuable, as it allows you and your team to adjust tactics as needed. Too often, the data won't be enough to uncover patterns and trajectories. Standard periods to analyze data include monthly, quarterly, or semiannually; with a cumulative period, holding excellence payouts back is normal until you've calculated the total results.

The right strategy is vital. The finance department may prefer annual pay, but this can de-motivate representatives if they fall behind their quota early in the year. Equally, plans that contain a feature in which each measurement period is standalone might keep sellers at the top of their game, but at the cost of overpayment.

Overpayments, underpayments, high cost of sales, poor performance distributions, plan "gaming," and so on are all typical compensation problems. A complete evaluation is vital to the incentive plan’s design process in order to get this balance right. Do this due diligence before you roll the plan out and regularly once the program is in action.

A tight evaluation process with the right analytics helps confirm if the plan works and whether you need to make course corrections.

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Evaluate your sales incentives plan

Evaluate your sales plan against these three criteria:

  1. Financial: How is the plan operating, and what are the costs (i.e., salesforce earnings and the company's return on that investment)?
  2. Objective: Is the plan driving the right behaviors and working as designed?
  3. Performance: Do you have the payout balance right? Are the top earners the top performers?

Creating an incentive plan that succeeds for your people, your business, and, let's face it, your customers, should be a priority. By following these guidelines and designing a plan in a logical and organized way, you can retain your good reps and motivate your underperformers.

Contact us to learn how our sales experts can help you match your incentives to your business strategy, motivate your teams to beat their targets and attract top sales talent.