Optimising Incentives
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Strategic Sales Targeting
Published on 10th June 2024
#strategy #Teams
“ A successful sales incentive plan benefits your sales team, your business, and your customers”.
By David Anderson
The Key to a Motivated Sales Team
Sales reps are driven by two things: money and transparency. They want to be paid what they deserve, but they also want to understand how their performance impacts their earnings, explains David Anderson, Senior Client Partner at Steinwick.
The Financials and Transparency Drive Sales Reps
Sales reps are driven by two things: money and transparency. They want fair pay and clarity on how their performance impacts their earnings, explains David Anderson, Senior Client Partner at Steinwick.
The Problem: Misaligned Goals and Frustration
When sales forecasts and quota achievements don't translate into fair compensation, trust erodes, top talent feels undervalued, and motivation suffers. This misalignment can even lead to overpaying underperformers.
The Solution: A Strategic Incentive Plan
The ideal sales compensation plan serves two goals: reward high performers and inspire underperformers to reach higher. Here's how to achieve that:
Four Pillars of a Winning Incentive Plan
Controllable: Goals should be clear, achievable, and based on effort and growth potential. Sales reps need to understand expectations and how their actions impact earnings.
Measurable: Track progress continuously with transparent metrics. Regular reporting allows course correction and ensures fair compensation based on performance.
Aligned: The plan should drive both individual and overall sales goals, ultimately contributing to the company's strategic objectives.
Simple: Focus on three or fewer key metrics for clarity and effectiveness. Simplicity allows reps to focus on achieving targets and drives measurable results.
Metrics for Success: Four Key Areas
Traditional sales compensation considers four types of metrics:
Financial/Sales Productivity: These core metrics (sales dollars, margin, units) measure volume and should be linked to the organization's financial success (gross/net profit, revenue).
Strategic: These metrics align with long-term goals like customer retention, improved service, and overall sales quality, all crucial for revenue growth.
Input and Activity: Focus on day-to-day activities like leads generated and sales conversations held. These metrics encourage sellers to prioritize activities that translate into achieving sales goals.
Subjective/Judgment: These metrics involve assessing desired behaviors and personal development. Use them sparingly, as the focus should be on objective, measurable performance.
Finding the Right Timing
Once you have a well-defined plan, determine how often to measure performance. Regular check-ins allow for adjustments, but significant data insights may take time to emerge.
Typical Measurement Periods
Monthly
Quarterly
Semi-Annual
Cumulative (for larger payouts based on overall results)
Anderson emphasizes the importance of choosing the right period. Annual payouts can demotivate reps who fall behind early, while overly short periods might lead to overpayment. Finding the balance requires ongoing evaluation.
Evaluating Your Incentive Plan
Regularly assess your plan's effectiveness based on these criteria:
Financial: Analyze costs (salesforce earnings) and ROI for the company.
Objective: See if the plan drives desired behaviors and functions as intended.
Performance: Ensure the payout structure is appropriate and rewards top performers.
Investing in Your Sales Team: A Win-Win
"A successful sales incentive plan benefits your sales team, your business, and your customers," says Anderson. Top talent seeks fair compensation, and retaining them ensures sales excellence and continuity. An effective incentive plan can also motivate underperformers to improve.
A well-structured plan is a win-win for everyone. If you need help evaluating your current plan or determining how to measure sales performance, contact Steinwick's senior partners.
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