Throughout history, sales incentives have been controversial among all companies. The debate is circulated around setting a balanced pay for salespeople while ensuring the best-case scenario. An environment where salespeople are always motivated, maintaining a high profit margin while orchestrating the overall organization strategy. Most company leaders will argue that sales force incentives have benefits, yet and often, incentives became a liability, creating more problems than solutions. This principle brings in inapt self-centric sales force behaviors, incredible short-term focus, or even a “hit and run” culture that hurts customer satisfaction and company’s performance.
Some industries followed the “you eat what you kill” philosophy, where their salespeople benefited either from commission-based income or a negligible basic salary with high incentive. This scenario has been applied long time ago in the distribution industry. As a result, sales people searched less for developing new businesses as they have already hooked long-time customers who drive them continuous and stable income. In other industries like insurance, the “kill” part might end killing the customer service. Furthermore, applying such a philosophy might break salespeople’s commitment and the feel of being part of an organization. This in turn would affect the sales culture tremendously. Similarly it marks a difficult hiring process.
Other companies follow a balance between the salary and the commission, striving to implant a consultative selling approach attracting business development executives to their teams. This ends up losing some complex tough deals. Further these experts might become only consultants to their clients applying none of their selling skills. It’s not about consultants, but such scheme brings no urgency to shorten or progress to the cycle as well as to develop new business. Different commission schemes shall be applied to bringing new business especially as the market growth slows, thus maintaining the motive to attract new clients.
Coming from the notion and the belief that sales is always a combination of art and science, we believe a pragmatic best-practice is to develop a commission scheme based on various factors that reflect the value generated to the company. According to Harvard Business Review, in an article dated back to June 2011, depending only on the incentives to motivate your sales reps is not a good way anymore. Incentives, training, tools & maps needed to follow a structured selling approach, and performance management should be equally distributed along every sales person’s culture.
We define “value generation” as everything that contribute to the overall strategy, sales strategy, sales organization, culture, sales model and last but not least to the sales targets.
How do you envisage the new sales incentives for the upcoming years? What commission scheme do you prefer as a company owner, or as a sales representative.
Looking forward for your comments, thoughts as well as case studies to be discussed below.