Incentive compensation management has become an important aspect of sales-driven companies. These companies have recognised, practised, and observed how introducing incentive compensation programmes instils commitment, enthusiasm, and a targeted approach across the sales force over time.
Employees are motivated by smart incentive compensation plans, which direct them to put forth their best efforts. Compensation planning is used by successful companies to reward every effort made at various stages of the sales cycle – from opportunity identification to closing the deal.
When done correctly, a well-thought-out incentive compensation plan may motivate employees to go beyond expectations, put in more effort, and prosper in today’s competitive market.
The Challenges of Implementing an Effective Incentive Compensation Management
Most companies use incentive compensation management, but only a small percentage of them succeed. According to the study, most companies are struggling to identify the best methods for implementing and managing sales incentives.
Implementing incentives based on key performance indicators or components of sales reps’ performance, for instance, is one of the most prominent incentive compensation management processes. This is how companies identify how much extra work an employee has put in to meet the company’s objectives.
Seven Best Incentive Compensation Management Practices Every Sales Leader Must Follow
Some incentive compensation management practices are well-known, while others are new and proving to be successful. Read on to know more
Bring Sanity in Sales Performance KPI
Incentives management becomes fixated on sales performance KPIs to understand and reward sales employee behaviour. KPIs are important for sales commission, but they must not be overwhelming for sales representatives to handle. Sales leaders should implement and monitor KPIs that are helpful and add value to the incentive management plans of the company.
It is suggested creating incentive plans based on a mix of performance measures that reflect actual sales performance. It will eliminate guesswork and shadow account management, as well as give actual data for appropriate incentive allocation. Choose the best three or four KPIs to encourage your salespeople and help them reach their full potential.
It’s critical to ensure that the entire system is balanced and effective. Unnecessary performance measurements in the internal management strategy or in the sales strategy will add complexity and lack of focus to the entire sales compensation plan for employees and sales professionals.
Align Your Sales Incentive Program with the Larger Goals of Your Company
Aligning the incentive programme with the broader business objectives is one method to eliminate all incentive confusion and questions. The strategy will be shaped and a roadmap will be created as a result of this.
Answer the following question when planning your next sales incentive program
- How does the incentive programme mirror the corporate strategy?
- Are the appropriate metrics being used in light of the present business situation and sales objectives?
- Why is it that your present incentive programme is failing to meet your company’s goals?
- What are the modifications or additions to the existing sales incentive programme that you want to make?
You’ll be able to make better incentive management selections and find stability once your sales incentive programme is connected with the larger aims.
Determine Your Short- and Long-Term Objectives and Design Your Incentive Programme to Meet Them.
Emphasising strategies and KPIs is only half of the incentive formula. If you truly want to make your short- and long-term objectives meaningful to the company and sales team, you must first identify and understand them. The more clarity you have in this area, the better your incentive program, sales commissions, and planning will be.
To deal with the organization’s changes and problems, companies frequently swing between long-term and short-term incentive planning. Companies with less cash, for example, may concentrate on long-term compensation and experiment with various combinations, such as cash + equity, etc.
Short- and long-term incentive schemes are heavily influenced by the economic cycle, market competitiveness, and the organization’s goals. Successful companies retain great sales personnel and expand their business with the correct balance of both throughout the years.
You can safely experiment with numerous incentive strategies as long as your sales incentive programmes motivate staff, drive them to get things done, and boost sales results.
Establish SMART Goals in your Sales Incentive Commission
When realistic sales targets are set, incentive management becomes successful. SMART goals, which stand for specific, measurable, attainable, realistic, and time-bound objectives, are used by businesses to develop incentive programmes.
- S= Specific
Because incentives are focused on individual accomplishments, it’s critical to use a results-driven approach to motivate each salesperson by setting a realistic goal. It will assist salespeople in setting monthly and annual revenue objectives, as well as goals for creating new customers, in order to maintain incentive earnings.
Create A Flexible and Dynamic Sales Incentive Structure
Every salesperson has had their share of success and accomplishments. Rainmakers, consistent starters, and underachievers will all be present. Companies implement incentive programmes to encourage sales representatives to enhance their performance. However, if there is only one type of incentive, motivating the diversified sales team, which includes both superstars and underachievers, might be difficult.
Implementing a dynamic incentive sales commission structure helps you distinguish star performers from median/underperformers in terms of output levels. It will assist in appreciating and acknowledging individuals who work extremely hard for the company and rewarding them with far bigger incentives than those who perform slightly above average.
This is critical for motivating underperformers to achieve star status and for star performers to continue to work hard to maintain their status, resulting in improved sales results.
Before the Plan’s Effective Date, Launch and Test Your Incentive Schemes
If your incentive plans have undergone significant changes, we strongly advise that you launch and test them before the effective date. It will assist you in comprehending the issues and, if necessary, ironing out any flaws.
At the same time, your sales force and employees will take into account your seriousness in implementing an incentive system that encourages them to perform at their best. Also, review your plans on a regular basis, at least once a year, to ensure the following:
- Are your strategies in line with your company’s changing and dynamic goals?
- Is your plan rewarding employees for the expected behaviours?
This demonstrates your dedication and awareness of individuals that work persistently for the company’s benefit, and the company rewards them with larger incentives. Testing successfully assures that your complete compensation cycle is ready to be implemented.
Leverage the Power of Sales Incentive Software
At the end of the day, effective sales incentive management necessitates a command of complicated data management. Employees in the sales department anticipate a timely and correct incentive distribution. It’s common for a team to manage incentives using excel sheets. Successful businesses have begun to use sales incentive software, demonstrating the value of having a strong programme to manage rewards.
A comprehensive compensation management solution addresses all aspects of the incentive compensation programme, including management incentive plans, bonus management, complex logic, commission programmes, and employee performance. Incentive compensation management software not only ensures that incentives are given on time, but it also aids in the management of sales performance, eliminating guessing and shadow practise by using real-time data.
Compensation software aids companies in developing incentive plan modelling, accrual forecasting, sales crediting, and other techniques for reinforcing incentive plans and incentivising salespeople.