Towards the end of the calendar year, organizations are busy setting or finalizing their annual sales incentive plan structures, as well as their sales performance goals. An optimal sales performance and incentive plan ensures that the sales force will remain engaged and committed to the organizational goals.
Due the multi-faceted internal and external factors that impact this process, it is important that organizations pay heed to the ten commandments of sales performance and incentive planning –
(I) Thou Shalt Honor Your Strategic Vision
Sales performance goals and incentive plans should be united and aligned to the long term strategic vision of the organization. Ensure that the individual components are complementary and synergistic.
(II) Thou Shalt Not Dwell on the Past
Always focus on rewarding improvements and do not be overwhelmed by the hang-over of legacy performance.
(III) Thou Shalt Embrace Simplicity
The sales performance goals and incentive programs should be simple to understand. Excessive number of goals and targets and irrelevant measures that do not add value should be excluded.
(IV) Thou Shalt Not be Short Sighted
Annual sales performance goals and incentive plans render unwarranted focus on quarterly results. This could endanger the long term strategic vision and profitable growth.
(V) Thou Shalt Treat All Equally
There could be several sales teams within the same organization who could be focused on different verticals or may even compete for the same business. While it may be difficult to ensure uniformity, the overall guiding philosophies regarding the design and management of goals and plans should be held sacrosanct across all teams.
(VI) Thou Shalt Not Limit Performance
Creating an incentive plan that limits performance downside could induce a “play it safe” behavior. Also, limiting the upside to earnings is a turn-off for superstar performers.
(VII) Thou Shalt Obtain Buy-In
The annual budgeting exercise is inundated with negotiations between sales, marketing, finance and the C-suite. It is imperative that the competing interests of each internal stakeholder are considered and incorporated in the final plan.
(VIII) Thou Shalt Be Flexible
Sales performance goals and incentive plans should be evaluated at regular intervals against prevailing market conditions and internal factors. Revise them to reflect unforeseen upsides and downsides to level the playing field for the sales force.
(IX) Thou Shalt Use a Combination of Measures
Give weighting to both financial and non-financial objectives. A blend of quantitative and qualitative metrics will be reflective of holistic performance.
(X) Thou Shalt Create Systems and Processes
Use performance management systems to provide timely feedback and communication on progress and achievements.
Action Item
So, how do you feel after contemplating on the ten commandments of sales performance and incentive planning? It’s time to take a step back and reflect on how many of them are followed in your organization and to what extent. More importantly, identify the bottle-necks that prevent the adoption these principles and start collaborating on removing these obstacles.