Rewards & Incentives

Does this sound familiar?

The compensation plan is often the most powerful steering tool a commercial director has, and at the same time the least maintained. It grows with every reorganisation, every new proposition and every negotiation with an individual account manager. Until, unnoticed, it rewards something other than what the strategy requires.

• The bonus pool is paid out in full, while the revenue target is missed.
• Your best salespeople leave, or coast once their target is in.
• Deals slip to the next quarter, or are pulled forward.
• Discounts are given to hit volume, at the expense of margin.
• New business lags, because the existing customer base is easier to score on.
• Nobody on the team can calculate what they will earn.
• After a good year, the target automatically goes up, and the team knows it.
• Pay arrangements have been agreed person by person over the years, and nobody has the full picture anymore.
• After an acquisition, sales teams work side by side under different schemes.
• The central plan does not fit the reality of every country or business unit.

This is not a lack of effort. Salespeople generally do exactly what they are paid for. The question is whether that is what your organisation needs.

Our approach

We combine your own data with benchmarks and with what research on sales incentives shows. Depending on your question, we go through every step or only review the existing plan.

1. Diagnosis

We analyse how payout and performance have related over recent years, by role and by person. Who earns what, for what, and does the plan explain the differences in results? We also talk to management and part of the team about how the plan works in practice.

2. Design by role

For each role we determine what it must deliver and how much influence the individual has over that. This defines the fixed to variable ratio, on-target earnings, the measures, the targets and the payout curve. A hunter needs a different plan than a key account manager.

3. Reward and growth path together

Top performers do not stay for the money alone. They stay where they can grow. That is why we link reward to a visible growth path: from account manager to senior or key account manager, from salesperson to team leader. Recognition, coaching and responsibility are reward components just as much as bonus and commission. It is the same Development Driven thinking we use to recruit commercial leaders: you retain talent by aligning with ambition, not just by raising the amount.

4. Modelling

We test every design against your historical data. What would it have cost, who would have gained or lost, and what behaviour does it reward? You know the cost in good and bad years, the impact per person and the effect on your margin before you decide.

5. Implementation and evaluation

A new plan stands or falls with its introduction. We help with the transition arrangements, communication to the team and tools for managers to use the plan in their coaching. After one or two periods we review together whether the plan does what it should, and adjust where needed.

Why this approach works

Sales compensation is one of the most thoroughly researched topics in the sales profession. Large-scale studies covering thousands of salespeople give a clear picture of what works and what does not. These insights guide our designs:

• Not everyone responds to the same incentive. Top performers deliver more under uncapped plans with accelerators above target. The broad middle responds better to several achievable intermediate goals. Laggards stay on track with short-period bonuses. One plan for everyone leaves returns on the table.
• A cap costs more than it saves. A ceiling on variable pay holds back exactly your best people and encourages pushing deals into the next period.
• Targets that rise with performance punish success. When the team knows a good year leads to a higher target, people hold back on purpose. A stable, transparent way of setting targets demonstrably delivers more.
• What you do not reward, disappears. Rewarding revenue alone brings discounting, short-term thinking and neglected tasks. A small number of well-chosen measures, such as margin or new business, keeps behaviour balanced.
• Fairness outweighs size. Whether salespeople see a plan as fair, with comparable portfolios and achievable targets, shapes their effort and loyalty more than the amount itself.
• Simplicity motivates. A plan a salesperson cannot calculate themselves does not steer behaviour.
• Recognition works. Non-financial rewards, such as public recognition and contests with multiple winners, have a measurable effect on performance at relatively low cost.

Bart Dietz, founder of SalesQuarters, is affiliated with Rotterdam School of Management and translates these insights to the reality of your organisation. As an executive search firm, we also see every day what pay the market demands to attract and retain commercial talent.