Building a Sales Incentive Program
The first episode of The Office that I ever saw was one about incentives. Manager Michael Scott (Steve Carell) is known for some wild incentive programs, some the mandate of corporate offices and others of his own making.
In this particular episode, the branches of Dunder-Mifflin Paper Company were competing in a weight-loss competition to earn time off. As you can imagine, hilarity ensues.
In another episode, Michael has trouble deciding who should receive a bonus. In an effort to make an informed decision, he fills the conference room with photos of each of his employees and tries to quantify each person’s performance by placing dry beans next to the photographs. Each bean represents a portion of the bonus to be distributed. This imprecise process doesn’t bode well for him either, especially when the rest of the office discovers his method.
What Dunder-Mifflin really needed was a well-structured sales incentive program. No need to resort to beans. Fortunately, we’ve got more information than Michael when it comes to building a sales incentive program.
The Rise to Incentivize
The Incentive Research Foundation (IRF) found that 60% of all U.S. businesses use non-cash sales rewards. They discovered that many of the businesses that supported such programs were among those with the highest revenue growth, customer satisfaction, and employee satisfaction.
Additionally, incentives don’t only keep your current employees happy, they also help recruit some of the best sales talent. Greg McBeth, head of revenue at Node.io, explains that developing sales incentives, while complex depending on your company’s pay ratios, is well worth the work because it will “help you attract and retain A-list sales talent.”
Basically, many businesses are already utilizing incentives to their advantage. But, one size incentive program does not fit all. There are many factors to consider when developing an incentive program that is both effective and customized to your company’s needs.
What Are You Incentivizing?
It may seem obvious, but one of the most important foundations for a sales incentive program is deciding what behaviors you’re actually incentivizing. The research uses the term “behaviors,” which sounds a little too similar to dog training, so IRF offers the term “reward opportunities.”
Your salespeople do a lot more than just selling. Sometimes their sales revenue alone may not adequately reflect the time and effort of their work. Thus, a highly-leveraged program merely focused on results may prove ineffective as it may create negative behaviors to achieve those results.
IRF notes that “organizations increasingly ask employees to take on additional roles and responsibilities that fall outside of their primary job duties,” also known as “non-core” job functions. These can include tangible assignments like leading an innovation team or more soft skill sets like exemplifying company values. When we engage in these job functions, we really are working harder, not just doing whatever we have to do to get numbers up.
So as you structure your sales incentive plan, be sure to include incentives for non-core job functions in addition to your key performance metrics to ensure your sales incentive program is well balanced. You may also realize that those non-core job functions need to be removed from your sales team so that they can focus on sales.
Rewarding the Right People
This is the part that cuts right to the heart of Michael Scott’s problem: how can you make sure you’re rewarding the people that have truly earned it and deserve it the most?
Jacco Van der Kooij, the founder of Winning by Design, suggests establishing levels for performance compensation that are based on the role of the individual as well as their longevity with the company, a standard model that works well in many cases. However, if the standard model isn’t a fit for you, you’re not alone. IRF notes that standard models may not take into account those non-core job opportunities to which many deserving sales people devote their time
Traditionally, incentive programs were designed to primarily just reward top performers. IRF found that many managers acknowledged their incentive program, but admitted that often not all their salespeople were eligible for participating in those. The key then is expanding incentive programs to ensure that you’re providing recognition for day-to-day activities, not just outstanding achievements. The day-to-day grind is, after all the majority of the job description. It simply doesn’t make sense to neglect it.
Choosing Your Metrics
The metrics you use to measure progress in incentive programs will probably vary depending on your company’s process and the reward opportunities that you choose to take. Whatever the case, make sure that you have processes in place to measure the processes you’re trying to award.
In most cases, this may mean investing in software that tracks key metrics and engaging in proactive coaching. As you also measure those non-core opportunities, your methods may become less formal. IRF suggests goal-oriented incentives so that rewards are not always for increasing specific metrics, but for reaching “individualized goal targets.”
For example, you could use Prodoscore to measure daily productivity and have a goal of having above average productivity for 4 out of 5 days each week. Their productivity score is based on the work they do across email, G Suite, CRM, and the dialer, and uses machine learning to focus your reps on the activities with the best outcomes for revenue.
Choosing Your Awards
Just like you should check for diversity in the reward opportunities available, you should diversify the awards themselves. This means more than just a bonus check. IRF found that the most common award formats around the U.S. are gift cards, merchandise, awards points, and travel. Over 80% use more than one award type, so don’t be afraid to mix it up.
Millennials especially are more focused on experiences over just monetary awards, so think of ways you can appeal to the unique audience in your office.
Office-specific awards can often be a good fit as well such as winners getting to pick where the team eats on Friday or last place having to wear a silly wig for the day.
Salespeople deserve to be rewarded for their work, whatever that work might look like. You don’t have to resort to crazy methods to keep your salespeople on their toes, you just need a solid plan.
It’s not easy to come up with an incentive program that is inclusive, enticing, and measurable, but it can be done! And you’ll see the fruits of your labor in the increased productivity and morale of your sales team.