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How to successfully incentivise sales teams

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19th Dec 2013
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If there is one thing we know, it’s that incentives work. If you want to get the most out of your team and keep them aligned with overall company objectives, incentives are the way to do it. However, recent UK mis-selling scandals have caused many to question the value of incentives. The EU proposing bans and bonus caps for bankers has caused business owners to question the true advantage of incentive compensation. But, it’s not that bonuses alone that is encouraging unethical conduct.

The real issue with the mis-selling scandals is that the salespeople’s best interests were not correctly aligned with those of the company. If sales teams feel pressured to deliver sales results at any cost, managers can’t be surprised when they see bad behaviour.

The truth is hard work deserves acknowledgement. Whether that’s giving praise when a team member delivers a great presentation, allowing a burned-out employee to work from home, or creating a well-structured bonus program for reaching certain milestones. Being flexible and responsive to employee needs goes a long way to increasing motivation and commitment to work.  The name of the game is creating an incentive program that clearly outlines the end goal and how each employee can get there.

Let data be your guide

At the moment, every bit of your sales and sales compensation data is captured in some kind of system – be it ERP, CRM, SPM or (dare we say it) spreadsheets. Unfortunately many companies still keep their sales data spread across disparate systems, when they could be utilising it. By automating and integrating this data, you can start to base compensation plans on actual analysis and insight, leading to a more rewarding and intelligent system for both your company and your sales reps. 

Reviewing previous sales plans can give managers insight to see what worked and what didn’t. What you want to keep a close eye on are any outliers – reps who are underperforming or cashing in despite mediocre effort. Where possible, slice historical data by categories such as title, region, vertical market, product, and customer segment. Look at what special incentives (SPIFs) worked the best – cash or non-cash.

Use data to compare the ratio of compensation paid against revenue gained, so you can see if you are paying reps too much or too little and what truly drove performance. Then look at whether your plans are helping to spur company growth. Are you putting enough resources in high-growth areas? Or, you could be focussing too much on low-growth products – your data holds all the answers.

Finally, use your data to see whether you risk losing your best reps. Perhaps your compensation plans do not stack up against industry standards. Are your reps leaving mid-year? If so maybe this could be to avoid missing targets which might have been set too high? 

Data should be a key part of your roadmap in setting impactful, realistic incentive strategies that drive motivation, align behaviour and discourage the kind of conduct we have seen in the mis-selling scandals. 

Be flexible

By offering a range of incentives, which can be attained in a variety of different ways, managers can ensure they are motivating every kind of employee – it doesn’t always have to be cash based. In fact, Incentive Studies by McKinsey & Company have found that non-cash incentives and rewards are two to three times more effective than cash at improving employee performance.

Think about the different demands of your team – families, health issues, pets, long commutes –then think about all the various incentives you can offer to help with these.

Then start to think about other ways employees can earn these bonuses, not simply just by making their targets. The following accomplishments should be rewarded as well:

  • Client/customer feedback
  • Years of service
  • Community service
  • New employee referrals
  • Bringing in new clients
  • Increasing efficiencies at work
  • Reducing company costs

Managers who take a flexible approach to both employee needs, and how they attain rewards, inspire higher levels of loyalty and greater transparency within the team - in this way you can ‘dangle the right carrot’ for each employee.

Maintain a healthy culture

So how can managers tell if they are promoting a healthy sales culture? There are a few key elements to look out for:

  1. Threats – companies with the best sales cultures are aware of what’s going on in their wider markets. Keeping an eye on the competition means teams can plan in advance and change plans accordingly. Too often teams continue blindly down a road which puts salespeople under increased pressure to make targets that were initially realistic but have since become outdated.
  2. Customer Focus – It may seem obvious but too often companies think about what they want rather than what customers want. This means arming every salesperson with an idea of who their customers are and what they need.
  3. Agility – In a tough economy, agility becomes increasingly important. Responding to threats in the wider market is the ability to move and refine plans quickly to take advantage of opportunities coming down the road.
  4. Share – Sales teams that have a focus on open communications and clear visibility into the numbers inspire better trust, loyalty and produce better results.
  5. Support each other – The majority of successful sales teams have high levels of team morale and low levels of backstabbing and idea stealing.  
  6. Clear accountability – This should be a positive thing, with reps encouraged to own successes and learn from mistakes.

With these steps, and good data analysis and insight, managers and sales teams can begin to move towards a more transparent, supportive sales environment and effective compensation plan. This means managers have a better view over any rogue team members and reps no longer feel pressure to hit quota by using illegal means.

Christopher W. Cabrera is founder, president and CEO at Xactly Corporation.

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