Companies must gain alignment from their teams by incentivizing around the key strategies and initiatives that come out of the planning process. However, while most companies have incentive programs, many aren’t effective in driving the desired results.
Most sales and marketing professionals (those who are executing many of the business strategies) say incentives have little to do with their ultimate performance. Why? Lack of clarity. If your sales and marketing team does not know exactly what they’re supposed to do and how they are accountable, then your money spent on incentives is going to waste.
Why Most Incentives Fail
Incentive confusion comes primarily from unrealistic goals and hard to calculate and/or confusing ways to measure success. In some cases, this confusion can actually create a dis-incentive for the employees, resulting in poorly spent company profits. In the end, many of these sales and marketing employees say they don’t understand their incentive, so they just wait to see what they get on the payout day.
The most common incentive program pitfalls that lead to this include:
- No alignment with or understanding of overall business strategy
- Unrealistic or undefined goals
- Complex or hard to measure goals
- Lack of communication or frequent reporting
- One size fits all approach
- Poor employee fit, lack of skills or training of the employee in their role
- Capped goals
- Poor leadership engagement
The Right Message, Executed by the Right People
With clarity being the biggest issue in the success of a business strategy (and incentive plan), it’s critical for all levels of management to provide a consistent voice at all times — not just the day they communicate the plan.
Many times, leaders revert to focusing on “urgent” matters and steer themselves and their teams away from the “critical” outcomes they are being held accountable for and being incentivized to execute. This confusion starts fracturing the line between the plan and the realities of everyday distractions.
Those whom you ask to execute on the plan need to have the skills to do so. Just because a sales rep is successful in the field, doesn’t necessarily mean they will be a great sales leader or marketing manager. So no matter how you may incentivize them, it will be very difficult for them to achieve their goals if their skills are not aligned with the new position. Make sure there is a good fit with ability and the position needs, and that the employee is well trained.
The Right Motivation
People are not motivated in the same manner. When developing incentive goals, take into account how certain positions, as well as specific people, respond to different types of rewards and recognition. While there are the ultimate goals the business wants to achieve (i.e., certain profit levels), there are different ways to impact those goals. People in different roles at the company have different skill sets, and people are wired differently. So figuring out these key triggers for performance is an important step in creating a successful incentive program.
If an incentive is based on performance that benefits the company financially, don’t ever cap it. The more the employee performs, the more profit the company should also make. The only time it gets tricky is when you bump up against capacity, but that’s the company’s issue. If you cap people, they will play the game of only bringing in business when it benefits them.
Sales incentives are especially tricky. Most goals are created to incentivize the top 20% of performers; that’s why the same sales people win the sales contest each time. The reality is, these people are already motivated to perform. The opposite goes for the bottom 20%. They may never perform — no matter the incentive. That’s why most pharmaceutical companies cut the bottom 10% of their sales forces each year. The biggest opportunity to drive results and move the needle is in motivating the middle 60% of the pack. So design your incentive to drive results within this group, not the ones who will perform greatly or poorly no matter what.
Here are some key points to remember for developing a successful incentive program:
- Start by communicating the strategic plan (this is the baseline for the ultimate goal)
- Be specific about each individual employee’s goals, how they are aligned with the strategic plan and how they will be measured
- Provide monthly reporting on business performance and individuals’ goals
- Have quarterly discussions on how each individual is performing against their goals
- Try to customize goals (vs. one size fits all) to the trigger points of certain functions and individuals.
- Incentivize the middle 60%
- Keep it simple
- Maintain constant communication and alignment among all leadership levels
The Power of a “Thank You”
Finally, the strongest incentive in any group of employees is also the easiest and least costly: simple recognition. It is proven that the small things are usually the most powerful. A handshake from the CEO, hand written letter from your leader or simple recognition at the beginning of every meeting goes a long way. Leaders sometimes focus too much on what needs to be fixed, versus taking a time out to recognize the team and individuals who have had wins along the way that will help the business fulfill the plan.
Following these steps will help you create a program that engages your team in a more powerful way, leading to stronger and more focused execution and ultimately yielding the business results you committed to in your plan. With better results come bigger incentive payouts for your team, and stronger employee retention. A win-win scenario.