Incentives: How to incentivize your sales team?
Designing Effective Sales Incentives
Effective incentive plans are critical for motivating sales teams and driving business growth. The old adage, "Pay for what you want," underscores the importance of aligning compensation with desired outcomes. This chapter discusses strategies for structuring incentives that not only motivate sales teams but also reinforce company values and goals.
Key Principles of Sales Incentives
1. Outcome-Focused Compensation: To drive performance, structure compensation plans that reward successful outcomes. This typically involves a balance between a modest base salary and a significant portion of compensation tied to achieving sales targets (On Target Earnings or OTE). This structure keeps the team focused on closing deals and achieving key performance indicators, rather than getting entangled in organizational bureaucracy.
2. Specificity and Relevance: Tailor incentives to the specific roles and responsibilities within the sales team. For example, Sales Development Representatives, who are responsible for lead generation, might receive incentives based on the number of qualified leads they generate, while Account Executives might be rewarded based on deals closed or revenue generated.
Strategies for Structuring Incentives
1. Tiered Incentive Structures: Implement a tiered system where rewards increase with higher levels of achievement. This not only motivates top performers to continue excelling but also encourages the broader team to strive for higher tiers.
2. Mixed Compensation Models: Combine different types of incentives to cater to various aspects of the sales process. For instance:
- Bounty Rewards: Offer immediate bonuses for milestones within the sales process, such as scheduling meetings or securing proposals.
- Commission: Provide a percentage of the revenue from closed deals, which encourages not just closing deals but closing larger deals.
- Profit-Based Bonuses: Consider linking part of the compensation to the profitability of deals to encourage salespeople to consider both top-line revenue and bottom-line impact.
3. Non-Monetary Rewards: While financial incentives are critical, non-monetary rewards such as recognition programs, career development opportunities, and additional time off can enhance motivation and job satisfaction.
4. Transparency and Simplicity: Ensure that the incentive plan is easy to understand and transparent. Salespeople should be able to easily calculate their potential earnings and understand what is required to hit their targets.
The Role of Culture in Incentive Plans
Aligning incentive plans with company culture is crucial. Incentives should not only drive sales outcomes but also promote behaviors that are in line with the company’s values such as collaboration, customer satisfaction, and innovation. This alignment helps to ensure that the pursuit of sales targets does not compromise the quality of service or team cohesion.
Regular Review and Adjustment
Incentive plans should not be static; they need to evolve based on changes in the market, business priorities, and team dynamics. Regular reviews—ideally on an annual basis—allow companies to adjust plans in response to feedback from the team and shifts in the business environment, ensuring that the incentives continue to motivate the desired behaviors effectively.
Conclusion
Well-designed sales incentives are powerful tools for motivating sales teams and aligning their efforts with the strategic goals of the organization. By carefully structuring these incentives around clear, achievable targets, and by making sure they resonate with the broader company culture, businesses can drive sustained growth and maintain a competitive edge in the market.
