Skip to main content
AnalyticsIconixx Insights BlogIncentive Compensation ManagementSales Performance Management

Top 5 mistakes to avoid when creating an incentive compensation plan

By July 10, 2013January 16th, 2023No Comments

The right sales compensation plan can motivate employees to achieve greatness and propel a company forward toward higher revenues and better business practices. Many types of companies, particularly those with sales-based operations, can reap the benefits from a great incentive compensation management program. Beneficial as these plans are, though, there are a few things to be wary of when developing a new system. VPs of sales must maintain a delicate balance during the planning and implementation process to make sure everything runs smoothly. Keep reading to find out the top five things to avoid when creating an ICM plan. 1. Poor communication Including all the way up to the implementation of an incentive compensation plan, sub-par communication can affect every level of business. Poor communication can be demoralizing for employees and can create confusion. Start an ICM plan off right by laying out the program clearly and concisely. Company-wide emails are effective, but if a leader of sales really wants to begin the process on the right foot, in-person meetings are best. A department or company meeting to explain the plan and take questions is another technique to think about. A VP of sales can create a PowerPoint presentation to explain the details of the plan, hand out packets of information and ask for feedback on certain aspects of the plan. This will make salespeople feel involved and will foster a smooth transition. Once the plan is in full effect, executives can utilize ICM software capabilities and will be able to resolve any potential communication problems that may arise. 2. Divisive plans A good incentive compensation plan motivates individuals and companies as a whole, which means salespeople should not feel constantly at odds with their colleagues. It’s perfectly acceptable to administer a plan for individual competitions, such as a quarterly sales goal in which only the top three salespeople earn a reward such as a bonus. This will acknowledge the hard work of individuals, which is important. However, it’s also a good idea to also initiate group competitions that will motivate workers in each department or on specific teams. This is a great opportunity for sales rookies and more seasoned salespeople to work together and learn from one another as well, increasing camaraderie and sales. 3. Ignoring the data Before any plan is put in place, it’s important for executives to gather pertinent information on sales performance and company objectives. One easy way to do this is to conduct a detailed investigation  using business analytics software. These programs automatically gather information using sophisticated data-mining technology and can provide illuminating results. VPs of sales can look through the results and see individual employee performances, product sales and even information from company branches across state and country lines. Without this information, it’s difficult to put an effective plan in place. Ignoring data makes the ICM process far more challenging – investing in these valuable tools is a savvy move for any company. 4. Failure to track the plan The work on an ICM program isn’t done as soon as it’s put in place. Instead, tracking employee performance under the new plan is vital to success. It’s important to keep up with employee performance metrics to track the success of a plan. ICM software provides hard numbers that are up to date so decision-makers knows exactly what’s happening on a day-to-day basis. Data is automatically updated daily, weekly, or as often as one chooses. 5.  No room for flexibility When the industry changes or a new product proves difficult to move, it’s critical that businesses are able to shift an ICM plan accordingly. Companies should be able to make changes to an ICM plan as needed to stay competitive and cater to employee needs. Incentive compensation software is great for making these changes. Software programs leave room for alterations whenever an executive or HR professional feels a plan needs to be reconsidered. Making changes as needed will motivate and engage a team, and keep a company ahead of the curve.

Leave a Reply

Close Menu
Ballast Point Ventures

Ballast Point Ventures is a later-stage venture capital fund established to provide expansion capital for rapidly growing, privately owned companies in diverse industries, with a particular emphasis on companies located in Florida, the Southeast, and Texas. The BPV partners have more than 70 years of combined experience investing in and building high-growth companies in a number of industries, including healthcare, business services, communications, technology, financial services, and consumer goods. BPV has $200 million under management and seeks to make equity investments ranging from $3 million to $10 million.

Harbert Management Corporation

Harbert Management Corporation seeks to generate superior returns for their investors by identifying and investing in the most promising early growth stage companies in the Southeastern U.S. HMC seeks to capitalize on what it believes are compelling regional dynamics, such as a strong and fast-growing economy, significant research and development activities, and an established entrepreneurial community. The HMC team combines substantial investment, advisory, and operating experience with capital and networking contacts to support great entrepreneurial teams in successfully executing their growth plans. With offices in Birmingham, Alabama; Richmond, Virginia; and Gainesville, Florida, it’s well positioned to partner with entrepreneurs throughout the Southeast.

KBH Ventures

KBH Ventures was an early investor in Iconixx Software. KBH's investment philosophy plays a significant role in the firm's successful track record. KBH believes in running businesses to be cashflow positive and profitable every month. Startups and companies in a startup mode, such as one that has been purchased in distress, are expected to generate revenue within the first six months and reach profitability within the first 12 to 18 months. KBH also only invests in or acquires companies that are in the startup phase or have less than $20 million in revenues. KBH targets technology companies that offer business-to-business services.

S3 Ventures

S3 Ventures is an early expansion and growth stage venture firm with $200 million under management. It’s focused on information technology solutions that solve large business problems. S3 also invests in medical devices that improve the human condition. S3 invests in category-defining opportunities. It partners with the team and help focus methodically on what it takes to build a successful company. S3 today helps talented entrepreneurs take their technology and market knowledge and form valuable businesses in a repeatable fashion. Investment sizes start at several million or more for Series A, B, and C financing.