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Motivation Inspiration
September 11, 2006
Incentives should motivate inspire and encourage a sales staff. But when they fall flat, they can harm company morale.
By Rebecca Aronauer
It takes more than a free set of golf clubs or a quarterly bonus to inspire salespeople. While these gifts mean well, for those who don't golf or who suspect that their bonus is inaccurate, they can do more harm than good.
When incentives fail to motivate, or even start to de-motivate, corporate culture is often to blame. Unfortunately, at some companies, recognition programs are poorly promoted and are not an integral part of the job. Other times, rules for incentives are too intricate for salespeople to follow. When either of these things happens, salespeople might not work to meet the programs' goals or might even become disenchanted with the company.
Commissions and financial benefits do drive salespeople, but company support is important, too, says Bob Nelson, a San Diego-based writer and author of 1001 Ways to Reward Employees. "The number one motivator is support and involvement," he says. "If the recognition doesn't have a context that makes it meaningful, it won't work."
Promoting friendly competition will show your salespeople that you care about success and will make them care about it, too. Ira Almeas, the president of Impact Incentives and Meetings based in East Hanover, N.J., recommends putting up posters and placing spots in the company newsletter and on the company's intranet to build excitement. "A lot of people spend too much time on the reward aspect, instead of the communicating," he says. To show your sales team how important the program is, he also suggests giving the winner new business cards with the victory noted under his or her title.
The gift also can send a message. Offering a prize that no one wants will not inspire anyone to work harder. "If you offer an incentive and no one wants it, you're starting at the wrong point," Nelson says. Some prizes, such as sporting tickets, can even come off as sexist or insulting, warns Bob Conlin, chief marketing officer for Centive, an incentive compensation management company headquartered in Burlington, Mass. He recommends using money for rewards. "Prizes are great, but cash is king," he says.
Steve Tatarian, vice president of sales for The SCOOTER Store, a scooter and power chair provider based in New Braunfels, Texas, uses team incentives to motivate his sales force. The teams don't compete against one another, but instead try as a group to beat previous sales records or pre-established targets based on their market territory. To keep the teams on track, sales targets and results are posted in each team's work area. The winners receive individual bonuses for their attaining goals and funds for the team to celebrate their achievement offsite. Tatarian thinks that working toward a goal as a team is motivating. "Some people will work harder for their team than they would for themselves," he says. "It's not so much for the money or the prize; it's for the sense of accomplishment." To build energy for quarterly sales rallies, the entire office is decorated around a theme. Recently, The SCOOTER Store used a military theme, and the sales office was festooned with nets and camouflage to create energy around the contest.
The team rewards program at the SCOOTER Store tackles one of the biggest problems in incentives: Creating different expectations for a diverse group of sales reps. The 80-20 problem in sales—that 20 percent of your team is responsible for 80 percent of your sales—makes motivating everyone on staff particularly difficult. You want to encourage both your A- and B-level sellers without alienating either group. If the contest just rewards the top sellers, everyone else will be excluded. That kind of contest won't change the behavior of mediocre sellers, and it may even discourage them, warns Jerry Biuso, the vice president of sales and marketing management for the North American headquarters of Banco Popular in Chicago. "Your middle- and bottom-level performers are demotivated in essence because they feel like they can't succeed," he says. "You have to make sure that all individuals can win." At Banco Popular, Biuso arranges incentive programs and tries to have a mix of both team and individual programs to motivate both types of sellers. For some rewards, the target is low enough to reward A-level sellers, but high enough to encourage B-level salespeople. In other programs, individuals try to beat their personal best.
But for top performers, surpassing sales records is harder, and senior sellers might balk at receiving the same reward as B-level salespeople after making a higher quota. Demotivated top sellers will cause short-term problems with lower sales and long-term ones with high turnover. Senior sellers may be tempted to leave and start over at a company where, as entry-level employees, their quotas will be lower. "If the top performers aren't motivated, they're going to leave," says Centive's Conlin. The cost of finding and training another top seller can be enormous.
Kickers are a good method to motivate elite sellers, suggests Marc Altshuller, executive vice president of Varicent Software, a Toronto-based incentive-compensation-management software provider. For companies that want to rein in sales expenses, kickers are a motivating alternative to caps. With caps, commission percentages go down after a salesperson has made a certain amount of sales. This strategy discourages salespeople from going beyond that target.
"If you try to administer your cap by reducing the payout when [a salesperson] gets to a certain payout, you're going to demotivate your sales force," Altshuller says. With kickers, salespeople receive a reduced commission rate until they hit a target, which reduces commission expenses. But once they hit that target, they receive a higher rate for all their sales, including the first one. Since a large financial reward based on previous sales accompanies hitting the target, kickers are one way to encourage A-level sellers to surpass previous sales records.
Some companies don't set up complex incentive plans such as kickers because too often their technology is limited. Microsoft Excel, one of the most common programs used to organize compensation plans, can cause myriad problems, such as distrust and goal misalignment. "Excel is a language unto the person who created the spreadsheet," Altshuller says.
That means that salespeople often don't understand how their compensation plan works, so they are unsure if they are hitting their targets. Worse, since few salespeople regularly see their spreadsheets, they end up counting their own sales to check against Excel's tally. This is a huge time-waster for your sales team. If their shadow accounting doesn't match their payout, their faith in the company is lost.
Jeff Evernham, the managing director of client services for Synygy, an incentive management company headquartered in Chester, Pa., warns that one mistake can create months-long distrust. "Trust is huge. If you don't have trust in the results, then people will become de-motivated," he says. "And if they don't leave, it's very difficult to turn that disillusionment around."
A year ago, Jeff Williams, vice president of sales at IronPort Systems, a Web security provider based in San Bruno, Calif., switched from Excel to Xactly, an incentive-compensation program. The change improved sales almost immediately. "It's been a huge success," Williams says.
"It's increased the field's productivity in two ways: One, they're not reconciling the commission; and two, it gives them complete visibility into where they're at on a daily basis." With Excel, IronPort sales agents could not accurately predict their commissions.
Xactly gives the IronPort team Web access to their sales results and predicted compensation, which Williams believes is a huge motivator. Using a more advanced compensation method also allows Williams to align sales compensation with the company's strategic goals by making commission rates correspond more accurately with the products the company wants to sell.Ultimately, the goal of rewards programs is to help business. But recognizing employees' successes can improve office spirit, too.
Sometimes salespeople feel like they only contribute to their company's bottom line, but a good reward can remind them that they are an important part of something larger, says Adrian Gostick, author of The Invisible Employee and managing director of the Carrot Culture Group in Salt Lake City. As he says, "A good reward can make somebody feel like he's an integral part of the organization and that what he does really matters."
SIDEBAR: Stretch Your Strategy
From a management perspective, incentive programs are designed to motivate employees to increase the right kind of business. But too often, the rewards end up not aligning with the company's long-term sales strategy.
After launching an incentive program, managers must vigilantly check that the program motivates the sales force to improve business as they originally envisioned. If the sales results don't fit with the overall goals, don't be afraid to tweak the program, suggests Jeff Evernham, managing director of client services at Synygy in Chester, Pa.
"A lot of times we find that organizations are not able to respond quickly to making a change in their incentive plan. And if they're not able to make the change, they're left behind," he says.
Collecting key statistics on sales figures throughout the project can help managers see what to adjust in the program, and make the incentive rewarding to their sales force—as well as the company.
—RA
Sales & Marketing Management Magazine
This article is brought to you by Sales & Marketing Management, the leading authority for executives in the sales and marketing field.
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