Designing an effective sales incentive scheme isn’t just about deciding how much to pay your sales team — it’s about motivating the right behaviors to drive business growth. The secret lies in choosing the right performance measures. If your sales scheme rewards the wrong activities, you’ll end up with misaligned efforts, wasted resources, and frustrated sales staff.
In this article, I’ll walk you through the different types of performance measures and how to select the ones that will push your team toward your company’s strategic goals. By the end, you’ll have a clear framework for designing a sales scheme that boosts performance and keeps your team motivated.
Key Takeaways
- Align performance measures with business goals – The most effective sales schemes motivate behavior that directly supports your company’s strategic objectives. Make sure the measures encourage the right sales activities.
- Clarity and measurability are essential – Sales staff need to know exactly what’s expected of them and how their performance will be measured. Vague or untrackable measures will undermine motivation.
- Balance quantitative and qualitative measures – While quantitative measures (like revenue) are easy to track, qualitative measures (like customer satisfaction and retention) are vital for long-term success.
- Don’t rush the design process – Select performance measures only after defining the compensation structure, eligibility, and overall budget. A thoughtful approach leads to a more effective and motivating scheme.
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Sales Schemes – A Complex Machine
A well-designed sales scheme should help your company achieve its goals in terms of revenue growth, market positioning, and customer satisfaction. A strong incentive program motivates sales staff to meet and exceed their targets, driving better results for the business.
An effective scheme strikes the right balance between challenge and attainability — it should push your team to perform without feeling impossible to achieve. When done right, a sales scheme increases motivation, enhances company loyalty, and drives consistent high performance.
On the other hand, a poorly designed scheme leads to confusion, frustration, and underperformance. Misaligned incentives often result in higher turnover and missed business targets.
Since the sales scheme directly influences company outcomes, it’s crucial to take the time to design it carefully. Even a simple model, like offering a flat 5% commission on new revenue, requires thoughtful planning. The performance measure (new revenue) and the percentage (5%) shouldn’t be chosen arbitrarily — they need to align with your broader business goals.
What Is a Performance Measure?
Performance measures track how well sales staff are meeting their targets. They directly influence how salespeople are rewarded, which makes them a powerful tool for guiding behavior and performance.
To be effective, a performance measure should meet three key criteria:
- Measurable – A performance measure is useless if you can’t track it. If you expect salespeople to achieve certain outcomes, you need to have a reliable way to measure them.
- Clear – Sales staff need to know exactly what they’re being paid for. Are you paying for new sales only? Net or gross increase? Spell it out clearly.
- Aligned with business goals – If your goal is to increase profits, there’s no point in rewarding cheap, low-margin deals. Your measures should support the company’s broader strategy.
The Risks of Selecting the Wrong Performance Measures
Choosing the wrong performance measures can sabotage your sales scheme. Salespeople naturally focus on what they’re being rewarded for — if the measures are misaligned with company goals, you’ll end up with unintended outcomes.
For example, if you incentivize revenue without considering profit margins, sales staff might close low-margin deals that boost revenue but hurt profitability. Or if you reward sales volume without factoring in customer retention, you could lose long-term business.
When performance measures fail to deliver results, many companies blame the scheme itself without considering other factors. If sales outcomes aren’t meeting expectations, ask yourself:
- Are salespeople confident and comfortable selling the product?
- Is the market highly competitive?
- How clearly was the scheme communicated?
- Are sales staff properly trained on the product and company objectives?
The performance measures might be at fault — but they could also be highlighting broader operational issues.
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At What Point in the Design Process Should You Select Performance Measures?
Many companies make the mistake of choosing performance measures too early. They’re eager to define how their sales team will be paid, but selecting the wrong measures can cause more harm than good.
Before deciding on performance measures, you need to define:
- Who is eligible – Will the scheme cover sales staff only, or also technical and support teams?
- Total compensation budget – How much are you willing to spend on commissions and incentives?
- Fixed vs. variable pay – What percentage of compensation will be guaranteed, and what will be performance-based?
Once these foundational elements are in place, you can confidently select the right performance measures.
What Types of Performance Measures Are There?
There are three main categories of performance measures:
1. Quantitative Measures
These are easy to measure and track because they’re based on concrete numbers. Examples include:
- New client acquisition
- Gross revenue generated
- Profitability of deals closed
- Number of sales made
2. Qualitative Measures
These focus on the quality of the sales process and customer relationships. They are harder to measure but are critical for long-term success. Subcategories include:
- Customer retention – Encouraging customers to renew or expand their contracts
- Customer satisfaction – Measuring how happy customers are with the sales process and product
- Market share growth – Expanding the company’s position within the market
3. MBOs (Management Business Objectives)
MBOs are strategic goals tied to broader company milestones. These are especially useful in business development roles. Examples include:
- Breaking into a new market
- Signing a strategic partnership
- Winning business from a key competitor
How to Select the Right Performance Measures
Choosing the right performance measure starts with understanding your company’s strategic goals.
👉 First, define your business priorities. Are you focused on increasing revenue? Building customer relationships? Expanding into new markets?
👉 Next, translate those objectives into measurable targets. For example, if your goal is to grow revenue from a new product, your performance measure might be: “New product revenue generated.”
👉 Finally, make sure the measure is clear and easy to track. Sales staff need to understand exactly how they’ll be rewarded and what’s expected of them.
When your performance measures align with business objectives, they become a powerful tool for driving sales success.
Conclusion: Align Performance Measures with Business Goals
Selecting the right performance measures is crucial for building an effective sales scheme. By tying incentives directly to company goals and ensuring clarity and measurability, you’ll create a system that motivates your team and delivers results.
Now it’s time to review your existing scheme. Are your performance measures driving the right outcomes? If not, it might be time for an overhaul. Start by aligning incentives with your strategic goals — and watch your sales performance soar.
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