How can you avoid creating a demotivating incentive programme that builds too much reliance on incentives and short-term thinking? We caught up wit
How can you avoid creating a demotivating incentive programme that builds too much reliance on incentives and short-term thinking?
We caught up with Jason Jordan, founding partner of Vantage Point Performance and co-author of Cracking the Sales Management Code for his view on how not to run a sales incentive.
“During my career, I’ve seen pretty a range of sub-optimal incentive systems.
I was hired by a manufacturing company to perform a general assessment of its sales force. My client was generally displeased with their performance and the company had not reached its revenue growth goals for several years. During sales leadership interviews, I discovered that the compensation plans were generous, so it seemed strange. But apparently, no salesperson had ever made their quota and therefore had never received the big incentive pay outs. Further digging showed that the CEO of the company thought that salespeople ‘shouldn’t reach their quotas’ and would only be motivated if they have something to reach for. Enter the unachievable goals. Naturally, the plan backfired. In the end, we proposed implementing some cash-based sales contests and other non-cash incentives to create some carrots that were actually edible.
There are 2 elements
There are many considerations in administering an incentive program, such as the mechanisms by which performance is calculated, the process of setting objectives and the timing of the actual rewards. But in general, you can motivate your salespeople successfully if they simply know what they need to do and what they’ll receive if they do it. If you break down any incentive program to its most basic components, there are two fundamental pieces. First, there is the performance target, and then there is the incentive itself, the reward that workers receive if they meet their performance targets.
Feed a culture of success
As a rule of thumb, you should set your sales targets such that two-thirds of your salespeople achieve their quotas. This ensures that your solid performers get to taste success and those who don’t still view their goals as attainable. Regardless, it’s worst practice to doom your salespeople to failure, including your top performers. When you start a race that you know you won’t finish, you tend to do a lot of walking along the way.
Sales targets can be set in a number of ways, from the top-down allocation of the company’s target to field-level negotiations between sellers and their managers. However you choose to go about it, make sure they are viewed as achievable, not a path to assured failure. When targets are set properly, your top performers will reach them and your bottom performers won’t. But they should never-the-less be motivated to try.
People like to succeed, and success is contagious. Don’t be afraid to feed a culture of success by setting your sellers up to win. And when they do, celebrate their victories loudly. Once your salespeople’s sails are full of wind, they’ll tend to pick up speed, and the resulting revenue regatta will be a beautiful thing to watch. It sure beats watching your fleet of boats sitting dead in the water, with no wind in the forecast.”
Jason is a recognized thought leader in the domain of business-to-business sales and teaches sales and sales management at the University of Virginia’s Darden Graduate School of Business.