Here
are some of the mistakes that we often see companies make when attempting to
design an effective sales incentive program.
These mistakes can turn your program into one that is very ineffective
at best or harmful at worst. Implementing bad incentive programs can be money down the drain.
Creating Conflict Within
or Between Departments
Make
sure that your rules don’t conflict with the other department procedure or
worse with performance improvement programs they may have in place. You will
always have some conflict, but you can work to optimize operations so that the
conflicts are less likely to occur. Consider
rewarding cross-functional teams as a part of the program
Motivating
the Wrong Outcome
The
easiest of these to check is getting increased sales without corresponding
profit, or leaning too heavily on profit that you decrease wanted sales
increases. Look for a balance in what
you want your outcomes to be.
Don’t
Have a Top Stop
Unless
you have a product availability or service issue or will have undue increased
operating costs concurrent with dramatic incremental sales results, don’t put a
cap on performance. Top stops will
eventually de-incentivize
outstanding performers--or at least limit their overall performance. You can adjust rules structures for
“windfalls” that may occur if necessary.
Protect
Current Business While Motivating for New Customers.
Salespeople
will be the first to see they can earn incremental commissions by focusing on
new customers over current customers.
You can and should adjust rules structures to accommodate for this
possibility. One way is to simply set a
“must maintain” type of rule in order to earn for new business, or tie the new
business earnings structure to the maintenance of current business.
Reward
Behaviors Your Salespeople Control.
Move
your objectives to the lowest possible level that your salespeople can
control. Nothing will kill a sales
incentive program faster than tying it to unreasonable objectives or to
corporate objectives out of their control.
Compete
Your Salespeople Against Themselves
It
has been standard practice for managers to compete their salespeople against
other company salespeople. Don’t! You should want them trying to beat the
brains out of your external competition.
The most successful incentive programs challenge salespeople to want to
excel on their own.
