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How to improve your incentive compensation plan

By April 5, 2017January 16th, 2023No Comments

Every sales team needs a strong incentive compensation management plan that will effectively motivate sales reps to reach their organization’s goals. While the best plans are structured around financial incentives, they go further than simply rewarding employees for making the greatest possible number of sales. To truly incentivize employees in a way that lines up with a company’s needs, incentive compensation plans must factor in a number of metrics beyond fulfilling sales quotas.

The problem with quota-driven plans
According to Business2Community, the biggest problem with an incentive compensation plan that focuses solely on number of sales made is that it only motivates employees for the short term. Plans structured to reward employees when they hit a specific number cause motivation to drop after that number is reached. They also cause the company to suffer because employees will do anything to get a sale made. This could lead to discounted products and unhappy clients who may feel they have been tricked into buying a product they don’t need. All of this could end up losing the company money and giving it a bad reputation.

Tips for improving your plan
Salesforce emphasized that every company is different and thus will need to tailor its incentive compensation plan to directly align with its specific goals. However, there are a few key ingredients to an effective strategy that any company would benefit from incorporating. No matter what, your plan should be structured to reward high performance. The main concern is defining exactly what high performance means for your company and making sure every member of your team understands.

Business2Community said companies can structure incentive plans to reward improvement and growth, sales made to more valuable clients and increased training. Rewards don’t have to be exclusively handed out to those who reach the highest numbers. Why not reward those who showed incredible growth from one quarter to another and those who are not willing to sacrifice quality and customer service to sell to the wrong customers? Why not reward those who are willing to put in the time to receive more training and earn more certifications?

Incentive compensation management software can help employees track their daily progress across a number of metrics. The software assists in promoting a variety of incentives through allowing employees to see exactly how they spend their time each day and not only the number of sales they make. The software also creates a healthy level of competition, another key piece of a successful sales team, according to Insight Squared. When sales reps, a naturally competitive group, can compare their own metrics to others and know their progress is accessible for others to see, they will be more motivated to improve.

The Globe and Mail urged managers to make sure every sales rep understands exactly what his company is looking for. At the end of the day everyone wants to earn more money, and when employees understand how they can do that in a way that will also benefit the company, everyone wins.

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