The sales incentive scheme is key to the success of any company that relies on selling products or services. After all, the sales incentive scheme determines how much sales people stand to earn. The most effective sales incentive scheme is one that truly motivates sales staff to reach or exceed targets (depending on company aims) and keeps them engaged with their roles.
When sales management realises there is something wrong with their system, they blame the most visible factors for example the commission rate they offer. Often the reason lies somewhere else.
One of the first one needs to check is not an obvious one; is that of the sales role definition.
There are some common errors that I’ve seen show up again and again when helping companies design their sales schemes. Being aware of these will help you avoid the same pitfalls:
Not knowing who has a sales role
It’s easy to assume that only sales people who are out there direct selling to clients have a sales role. However, there are lots of other roles that contribute to successful sales, such as technical support.
Not defining sales roles clearly enough
Staff and management need to be clear on the responsibilities of each sales role, and know exactly how that role adds value to the organisation.
Not understanding who is involved in each sales role
Sometimes people from other teams or departments are involved in a successful sale, and it’s important that those people not be overlooked.
All these mistakes can create weaknesses in a sales motivation scheme. However, if I were to sum it up in one sentence it would be this: An ill-defined sales role is one of the biggest threats to the success of a sales motivation scheme.
It’s important to remember that the design of the sales scheme is about incentivizing sales roles rather than individual sales people. What do I mean by this? Think of it this way: Although there are times that one sales person gets different commission rates than another in an equivalent role, it’s rare. In most cases the level of compensation for each role isn’t based on the person performing it, but on the role itself.
Sales people performing identical sales roles should always share the same objectives, and have similar targets, financial opportunities, and opportunities to reach their targets.
If sales incentives schemes are built around sales roles, then it’s important to make sure those sales roles are well defined.
A lack of well-defined sales roles creates confusion for management and staff alike, and risks decreasing the efficiency of the sales compensation scheme.
A well-defined sales role is one in which both the sales person and the management understand:
- The responsibilities of the role
- The sales person’s objectives and targets
- Which activities the sales person is expected to carry out
- How the sales person’s performance is measured
A failure to properly define a sales role has a multitude of effects which can ultimately affect the success of a company.
Not defining a role leads to confusion among not only the sales force itself, but also stakeholders, management, and the incentives design team. After all, how can you design an incentives scheme if you don’t understand clearly what the sales force is supposed to achieve?
Paying sales people for the wrong reasons
If the sales role isn’t properly defined, management don’t know exactly which part of the role is supposed to be incentivized. As we talked about above, is it direct sales? Keeping existing clients? Finding new leads? For example, if an account manager is responsible for upselling to existing clients, but the commission scheme doesn’t actually incentivize him for doing so, confusion reigns. And the manager won’t be very motivated.
Missing key targets
If sales people don’t have well defined roles or properly understand what it is they’re being motivated to do, it’s much harder for them to hit their targets.
High turnover in the sales department
When sales roles are poorly defined, it’s difficult for sales people to understand, reach, and exceed their targets. That means less commissions for them, poor job satisfaction, and ultimately a move to a company that gives them a better chance of making good money.