Anatomy of a Reward

There are two overarching rules for a sales incentive and reward plan – keep it simple and make sure you get it right from the start.

While there is potential complexity around program ownership, technology platforms and compensation formulas, over complicating a sales incentive plan reduces its chances of being embraced and achieving goals.

Concurrently, a well-designed plan will deliver three crucial business outcomes: healthier profits; a high-performance sales culture; and a stronger recruitment and retention record that satisfies all stakeholders.

So pay attention to program anatomy:

1. DEFINE YOUR GOALS

Some fundamental issues must be addressed before thinking about possible rewards for sales teams, according to Alan Heyward, sales and client service director at Accumulate, a leading Melbourne-based specialist in recognition, reward and incentive programs.

First, it is essential to set clear business objectives with associates and senior management. Do you want higher unit sales, for example, or movement of high-margin products?

“That will be the basis from which you measure success later,” Heyward says.

Second, consider the levers at your disposal to lift sales such as cold calls, outbound calls or client meetings.

Third, determine a strategy to measure results using either a metrics-based approach or through observation of behaviours, and spell out benchmarks and performance measures.

Fourth, determine who will take responsibility for the program internally, “otherwise it will be like a rudderless ship,” Heyward observes.

With those four factors covered, you will have a compelling reason to proceed with, or rethink, a rewards plan.

2. SELECT A REWARDS PACKAGE

Be clear and understand before you begin that an incentive program is very distinct to a team’s standard compensation. This fact should be top of mind for management, finance and HR, as well as for the sales team itself. A culture of recognition with physical rewards and experiences has the potential to motivate, keep interest levels high and foster a lasting sense of excitement and engagement.

3. SET CLEAR SALES TARGETS

Sales goals should be clearly defined and achievable, while being tough enough to challenge and motivate sales teams. US expert James Stoeckmann suggests a ‘Goldilocks plan’.

“You want it to be not too difficult to achieve or the salesforce (will be) demotivated because the sales quotas are set too high,” he says. “You don’t want them to be too easy either.” In his view, up to about 70 per cent of the salesforce should be hitting targets that entitle them to bonuses or incentives over and above base salary.

4. DEFINE YOUR FORMULAS

Setting payout guidelines is vital. Stoeckmann says most companies adopt a 70:30 ratio of base salary and incentive compensation, or thereabouts. You can then leverage “the amount of upside” for salespeople who beat their targets. A two-times or three-times target incentive is typical. The former means, for example, that the 30 per cent incentive is doubled for excellent performance for a total payout of 130 per cent. The latter triples the 30 per cent incentive for a total payout of 160 per cent.

Do not ignore governance policies: they help resolve questions or conflicts over sales compensation and are the most sensible way to avoid confusion.

5. USE A SENSIBLE PORTAL

An online portal creates a consistent and easily accessible place for salespeople to view details of an incentive program, regardless of geographic location. Accumulate’s Heyward says access through a laptop, BlackBerry, iPad or iPhone ensures ease of participation. The portal typically includes elements such as the rules of engagement, rewards options and a dashboard on how sales professionals are performing.

6. ESTABLISH COMMUNICATION

A program or portal is all but meaningless without strong and frequent communication about the nature of the program and its goals.

“Programs live and die by how well and how frequently they are communicated,” Heyward says.

Three phases are required: pre-launch ‘teasers’ via email or posters; a launch that may involve a party or road show, backed up by something physical such as a brochure to remind sales teams about the rewards on offer; and in-program updates via the portal, emails, SMS and face-to-face dialogue. Leveraging existing communication channels where possible is important to avoid communication saturation.

7. AGREE REDEMPTION POLICIES

Not only does Accumulate offer a rewards suite of about 3000 items, but it also appreciates the importance of timely delivery. “People don’t expect to redeem an award and for it to turn up in two days, but they don’t want it to take four to six weeks,” Heyward says. So set delivery times, and stick to them.

8. CONNECT TO THE FRONTLINE

According to Heyward, it is vital for data to be properly analysed and then fed back to frontline managers so they can truly see how salespeople are performing. Accumulate helps ensure information is easily understood and has context for participants.

“We can actually show you how that relates to other activity and [how it] drives performance,” Heyward says.

While sales incentives plans should be simple, Stoeckmann says they require constant attention.

“It’s not something you can just roll out and put on the shelf and come back to next year and say ‘how did we do?’”