Strict incentives may cause unethical
actions. Lenient ones don't push hard enough. Find a balance.
It’s clear that strong incentive programs are
important to the success of any employee team, sales or otherwise. Research shows that:
•
Incentive programs improve
performance by an average of 22 percent.
•
33 percent of all
sales can be attributed to incentive programs.
•
More than half of all U.S.
organizations use at least one type of employee incentive program.
However, it’s important not to push all of
this too far, lest you end up facing the perils resulting
from overambitious sales quotas. Nor do you have to look very far to find
a great case study illustrating them.
The Wells Fargo sales quota debacle
This past September, Wells Fargo executives
sat before the U.S. Senate Banking Committee describing the unethical sales
practices that led them to open thousands of fraudulent accounts, fire more
than 5,000 employees and pay a fine of $190 million.
According to the bank, many of these accounts
were opened due to strict sales quotas that were incredibly difficult for
employees to hit without resorting to shady practices. In the wake of this
scandal, those sales goals have been eliminated in order to better serve
customers and provide salespeople a more sustainable working environment.
The lesson to be learned here is clear: Sales
quotas and incentives have a direct, important impact on the way your team
members perform their jobs. If your incentives are too strict, you risk
forcing employees to act unethically. If they’re not strong enough, on the
other hand, employees won’t have a reason to go out and do the very best they
can.
The key lies with striking a balance. Here
are four things you can do to ensure that your company is offering the right
kinds of sales incentives.
1. Use competition instead of
quotas.
Tracking one single metric, such as total
sales or outbound calls, doesn’t take the whole scenario into account. You
need to figure out a way to weigh all valuable sales activities and
add them together to get a true picture of how effective a salesperson is.
Once you have this formula, it’s time to
gamify the system. In a report published by the Harvard Business Review, one company used a similar scoring system to create a
fantasy football-based, team-style competition. This had a dramatic impact on
performance, with noticeable increases in the number of outbound calls
-- calls that led to appointments and visits to the
company's retail location. As a result, inside sales referrals jumped an
incredible 200 percent.
2. Make incentives quarterly
instead of yearly.
For your low-performing employees, quarterly
bonuses are actually a much stronger incentive than they are for your
superstars. When such a bonus is removed and replaced with an annual one, the
performance of those low-performers drops by an average 10 percent, while
the average performance of stronger employees drops by much less.
The reason is simple: These employees need
more frequent incentives to perform. Pace-setting incentives are important for
people who aren’t able to motivate themselves and need a little boost to
contribute effectively.
3. Create incentive tiers.
It’s important for sales incentives to be
challenging but also achievable. Your sales team members need to be close
enough to reach their goals, to feel the need to push themselves. But if
those goals are too easy to hit, there’s no incentive to work harder.
The most effective way to handle this is by
creating a variety of tiers, much like many rewards or loyalty programs. As
employees perform better, they’ll earn better and more valuable incentives. The
beauty of a tiered incentive program is that employees will always be close to
their next incentive, no matter how they’re currently performing.
4. Explain the program clearly.
An incentive program, even if it’s based on a
wide variety of metrics, must be simple to understand in order to be effective.
If it isn’t easy to understand and measure, employees won’t know where they
stand and what they need to do to reach their next incentive.
It’s critical that employees know exactly
what contributes to their incentives and how they can improve. Don’t hide
the metrics and calculate them in the background. Provide your employees
with the exact formula for success. Whenever possible, give them access to
updated information so they know where they stand at all times.
Your sales team is in charge of directly
driving business for the organization. Finding the right way to incentivize its
members has an enormous impact on the company’s bottom line and is a sales manager’s
most important priority.
Certainly, it’s difficult to find the right
balance between "too difficult" and "too achievable." But
by following the advice outlined above, it's possible to develop a plan that
works for any organization.
Written by: Danny Wong
Credit: Entrepreneur.com
.jpg)
