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How To Build an Incentive Compensation Strategy That Will Motivate Your Sales Team

November 8, 2021 Marisa Iacobucci  
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Every member of your sales team has their own quotas and targets—and like a well-oiled machine, they work together to build towards your greater company goals.

Sometimes, though, you need a little extra oil to grease the wheels and keep everyone moving in the right direction.

For many sales teams, that means putting an incentive structure into place that will motivate your team and keep them on track to meeting their goals. That’s where incentive compensation management (ICM) comes into play.

Your ICM strategy, whatever it looks like, should keep your sales team focused on meeting their quotas and ensure your overall organizational objectives remain attainable at the same time. To start planning your sales incentives, consider the following:


What Is Incentive Compensation Management?

By drawing on ongoing sales and revenue data, a well-managed incentive compensation management program can help you determine just the right incentives to spur your sales reps on. It tracks how close they are to reaching their overall quotas and any goals along the way. It also lets you visualize how everyone is contributing to your overall company objectives.

To get the most out of your incentive plans, you’ll want to align them with your business goals—especially those that most contribute to your company’s financial success. By aligning targets to goals your entire company comes out ahead. 

But just as importantly, the best ICM programs provide clarity along the way—not just by giving sales reps visibility into their progress, but by letting everyone view changes to your incentive plans as they happen so that they have a clear idea of what they’re trying to achieve. If your ICM program has sliding compensation rates that escalate with sales volumes, for instance, they can track that in real time—and continue achieving their best results.

Of course, there are other benefits a well-implemented ICM program can accomplish as well.

Benefits of an ICM Strategy

When implemented well, with clear sightlines to the data and calculations, an ICM strategy can help you achieve a variety of benefits for your sales team and organization as a whole—starting with the following:

1. Better Financial Results

Put simply, ICM programs can act as strong sales accelerators—and that has obvious financial results. By keeping your reps focused on sales performance and ensuring results are visible so that they can adjust and reprioritize their tactics and focus as required, you’re empowering your team to meet and exceed their sales quotas. That has repercussions on your organization’s revenue goals as a whole, building higher overall performance.

2. Improved Visibility Into Profitability

While obviously a critical metric, sales aren’t the same as profit. There are costs along the way that will affect the profitability of your sales team. And the various products and services you sell will each have different net profit levels that go beyond their selling prices. Warehousing, advertising, labor and the expenses your reps accrue in the process of making a sale all factor in. A well-driven ICM program can help you identify your most profitable products and services, allowing you to set your targets appropriately to focus on the most profitable among them. Which leads us to number three ...

3. More Nuanced Incentives 

The most effective ICM programs understand that not all sales are created equal—and will let you focus in whichever way you choose. Perhaps you want to prioritize specific product lines or services that you know earn the best profits, want to bring attention to a new addition to your offerings or hope to make better headway into certain markets. If those are more difficult sales for your reps to make, they aren’t likely to prioritize them without the right incentives. An ICM program can help you do that, allowing you to use different rules or incentives to prioritize certain markets and/or products and put your sales team’s attention where you want it to be.

4. Motivation for the Whole Team  

While it may be most common to incentivize your core sales team, they’re not alone in making significant contributions to your overall sales. With a structured ICM program in place, you can start to identify the other team members who contribute significantly to sales, from business development reps (BDRs) to after-sales support—and determine whether the entire process would benefit if they too were rewarded with some kind of incentive structure. It can also help you split incentives fairly when multiple team members contribute to a single sale.  

5. Optimization Opportunities

You can also use your ICM program to get a clearer view of whether the territories and targets you have in place are effective in meeting your company objectives or are in need of improvement. Through a clear line of sight into current and past sales results and a view into ongoing metrics, you’ll be able to continually tweak your sales goals and ensure you’re offering the right incentives and sales commission rates to continue building toward your overall financial results. 

6. A Way To Look Ahead

Finally, with all of your data in one place and easy to analyze, an ICM program can help you look ahead, to determine whether you’re applying the right targets for your future growth goals. Tools such as predictive analytics can help as you determine the best ways to set quotas and incentivize your sales team, while scenario modeling can assist you in predicting future sales and determining how to optimize your results and maximize profitability.

Types of Sales Incentive Plans

Of course, there are different ways you can incentivize your sales team and different types of ICM programs you can use to help you do so. So start by determining the plan type (or combination of plan types) that will best meet your business needs and match your organizational culture. 

  • Sales commissions are among the most common, offering lump sums to your sales team based on the targets that they’ve met.

  • Spot awards tell an employee “job well done” and are usually paid shortly after the completion of a specific project or task. They’re more spontaneous (and often more frequent) than other types of plans—though they’re also usually smaller in terms of value.

  • SPIFFs (Sales Performance Incentive Funds) help drive short-term sales and are often used when inventory needs to be cleared out or specific products aren’t selling well. Tied to a set time period—whether it’s days, weeks or months—SPIFFs are rewarded if reps meet certain targets during the time allotted. 

  • Annual incentive plans are often tied to your performance review cycle, rewarding employees for accomplishing a set list of goals laid out for them at their last performance review.

  • Team incentive plans tie incentives not to the performance of individual employees, but of teams. They’re usually used when a cohesive group effort is required to meet the goals set out.

  • Project bonuses are tied to specific projects and are paid out when a project is completed successfully and on deadline.

  • Management incentive plans are meant to motivate managers and to help align their performance with company goals. They could be organized around a pay-for-performance model that offers pay rates based on performance or may come in the form of stock options or gain sharing instead.

  • Profit-sharing plans offer your team members a share of your company’s yearly profits, investing employees in overall business success.  

Putting Your Sales Compensation Plan Into Action

Once you have a sense of the goals you want to achieve and the type of sales incentive plan(s) you want to put into action, a few other things will help you keep your ICM program on track and build your sales momentum. 

Communicating Your Plan

No incentive plan is going to get far if you don’t communicate it properly—which means getting the word out is critical to its success. That starts by clearly outlining performance goals to individual sales reps so that they know exactly what they need to do to get rewarded and what the incentive structure looks like. It also means communicating your larger company goals so that they know what they’re contributing to and what their part is.

Choosing the Right Technology

A spreadsheet-based ICM program can be cumbersome and time consuming, making it difficult to track your goals, keep a clear line of visibility into incentive calculations and bring in data from disparate sources. With the right technology in place, you can help save sales managers’ and administrators’ time while empowering your sales team with dashboards that offer the real-time insights they need to keep track of their targets and incentives. Leadership, too, can easily track overall sales goals to see how they’re keeping up with company objectives.

Measuring Your Plan

Measurement is a key component of any incentive plan. After all, if you don’t measure performance, it’s going to be hard to reward it. Also key is measuring how well your incentive plan is working so that you can understand what really motivates your team and make changes as necessary for best results. Maintaining accurate data on how your reps are faring and how their accomplishments are adding to your overall company objectives is key to your plan’s success.

With the right ICM program in place, you can build a more effective sales team and create a clear line of sight into how they’re achieving their goals—motivating your team and putting everyone on the path to success. 

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