Creating a motivational sales incentive plan
The members of a sales team in a modern business-to-business setting usually operate with a relatively high independence. At the same time they have a huge effect on the bottom line of the organization as the sales team acts as the biggest driver for revenue. Because of this, it is essential that the management can ensure that the actions executed by the salespeople benefit the organization and its customers and drives towards desired results. (Zoltners et al., 2009.)
A sales incentive plan is a management tool that aims to direct the actions of salespeople towards the desired results of the organization. The plan rewards salespeople in some form or another for actions that the organization has deemed that are beneficial to its strategic goals without the need to diminish the independence and autonomy that the employees are used to. (Cichelli, 2010.)
A sales incentive model can act as a motivator for the employees. Motivated employees work more, execute their tasks more efficiently and stay in their jobs longer, leading to improved margins. However, creating a sales incentive model that achieves all this is not simple. (Pink, 2011.)
A motivational sales incentive model within Company X
This article presents a thesis by Aki Kola for Turku University of Applied Science’s Master school that covers the creation of a motivational sales incentive model within a commissioning organization, Company X. Company X is a company operating in the field of financial technology, where they seek to offer high net worth customers with a customer experience reminiscent of traditional private banking, but in the context of virtual assets.
In the work itself the salespeople need to balance between a high level of regulation, the business interests of the organization and the best interest of the customer. The organization needs an incentive model that is able to focus the attention of the salesperson on the correct balance between these variables, enabling them to create sales revenue for the organization and opportunities for the customers without leading to compliance risks realizing.
To understand how the sales incentive model should be created, a survey was done for the sales team of the organization to map out what kinds of motivational variables the employees can identify and how the salespeople would rank the variables’ importance. The employees were also asked about the goal setting and possible incentive options of the model.
Changes in the world of incentives
Historically the most common way of incentivizing a sales force is to give them direct monetary commission in the form of commission or bonuses (Cichelli, 2010). Modern literature challenges the efficiency of such compensation methods, claiming that modern salespeople stay more motivated through more complex incentives, such as company stock or options (Parvinen, 2023). According to modern motivational theories, the strongest motivational factors for employees – assuming that their fixed compensation is on a level where they do not have to worry about paying rent, mortgages or food – are autonomy (the ability to solve the problems their own way), mastery (the ability to get better and learn through their work) and purpose(the feeling that the work that the employees are doing has meaning) (Pink, 2011).
However, the survey suggests that while the employees value autonomy to a very high degree, purpose and mastery are not seen as important to the employees’ motivation. The importance of purpose does come through indirectly, as the survey data shows that the employees consider understanding the value generated to the organization and customers very important to their motivation, but the ability to educate and improve oneself is not seen as important in this organization as the literature suggests.
The survey data also shows that while indirect forms of compensation are seen as valuable and motivational, the salespeople still consider direct monetary compensation the most important part of any incentive model that they can think of. The survey showed clearly that goal setting should take the team into account, as the participants agreed strongly that having at least a part of the incentives rely on the performance of the team instead of that of the individual would increase not only personal motivation, but also to support other members of the team.
Useful results, but not outside the organization
While the results apply for the commissioning organization, Company X, the number of participants in the survey was quite small (n=8). This means that the results should not be examined outside the organization. For more universal results a larger study is needed. This study did, however provide the commissioning organization with more data to base their upcoming sales incentive plan on.
References:
Cichelli, D. J. (2010). Compensating the sales force – A Practical Guide to Designing Winning Sales Reward Programmes. McGraw-Hill, New York, USA.
Kola, A. (2023). Creating a motivational sales incentive plan. Turun ammattikorkeakoulu, Master’s Thesis in sales management.
Parvinen, P. (2023). Aihe 5: Myyjän palkitseminen[MOOC Lecture]. Parvisen Akatemia, Myynnin verkkokurssi. https://parvisenakatemia.fi/section/myyntityo-tehokkuus-oman-tyon-kehittaminen-ja-henkilostojohtaminen/
Pink, D. H., (2011). Drive – The surprising truth about what motivates us. Riverhead Books, New York.
Zoltners, A. A., Sinha, P., & Lorimer, S. E. (2009). Building a Winning Sales Force : Powerful Strategies for Driving High Performance. AMACOM, New York, New York, USA.