I have being tuning in and out to a lively and very interesting discussion about sales incentives on TSE’s new LinkedIn group.

Tibor Shanto who started the dialogue, points out that “In sales it is a given that revenue is the ultimate measure of success. In general no one takes issue to paying commissions for realised revenues.

At the same time most people we talk to agree that revenue is achieved as a result of specific actions and behaviours executed by the sales professional; making revenue a ‘result’ of these actions and therefore making revenue a lagging indicator.

Add to this the fact that most people adhere to the view that incentives and incentive programs should drive behaviour. Putting aside MBO rewords, and PM based on scorecards and KPI’s, does it make sense to only pay commissions on revenue or is it time to examine paying a portuin of incentive on specific behaviour?”

The resulting dialogue, raised a number of very interesting questions; not least of which is a more general question. How effective is plain old money in motivating salespeople?

I for one, have always questioned its effectiveness and have thought that more has to do with what money provides rather than the money itself.

Several psychological studies would seem to back this up, with a very interesting body of evidence now claiming that traditional rewards (and punishment) - are actually counter productive in promoting behaviours.

Jim Micklos weights in with “top performers do not reach and remain at that level solely for the money itself. They’re in it for what the money gives them – security, luxury, status – all of which are psychological and emotional rewards (applause), not monetary.”

He goes on to say “When exceptional performance is required, it is most effectively driven by exceptional reward. Several studies have shown conclusively that, dollar for dollar, non-cash incentive programs (praise, recognition, merchandise and travel awards) are far more effective than cash”

I know that something that employers often fail to grasp is that a badly designed compensation plan can as easily act to de-motivate salespeople. From my own interviews with salespeople, this is much more common than companies would like to think.

One area that unfortunately gets overlooked by employers when designing incentive schemes, is personal and career development programmes and training. Rewarding salespeople in this way, demonstrates that the company truly values the salesperson on a personal level. In my own experience, providing salespeople with additional skills and expertise is one of the very best and most effective ways of motivating them.

Putting together a successful incentive structure is a big challenge for businesses because of the complexities involved. Getting it right can drive sales and revenues where as getting it wrong can cause big problems.

The nature of the economic situation that we now find ourselves in makes getting it right even more important. What do you think? I would love to hear from others about sales incentives. In your experience, what works and what doesn’t?

Tags: jim micklos, linkedin, sales bonus, Sales Commission, sales incentives, sales payment plans, Tibor shanto, Top Sales Experts

This entry was posted on Tuesday, April 14th, 2009 at 2:18 pm and is filed under Management, Sales. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.