Sales Compensation – The Devil is in the Details

by: Mike D’Amico

In Psychology 101 you learn that it’s not possible to motivate another person. Motivation can only come from within. A motive is what causes somebody to act in a certain way. A person has to come up with their own reasons for giving discretionary effort towards doing something.

What you can do is create incentives that may help someone find a motivation to act in a desired way. One definition of incentive is:  “Something that incites or tends to incite to action or greater effort, as a reward offered for increased productivity.”  

This principle is very much in play when organizations utilize incentive compensation programs. In order to establish a context to help an employee find the motivation to act or behave in a certain way, organizations will incent the desired behaviour through financial rewards.

This is most applicable in Sales Compensation which is much more individually focused than other corporate incentive programs. Corporate incentive plans are typically anchored around enterprise-wide goals or financial metrics. This can make it challenging for an employee to have a line of sight to how their actions will impact results. Sales compensation incentives are paid out for achieving individual goals. This direct line of sight makes it much more likely that you will be able to influence behaviour. A well designed program can help focus the time and effort of sales reps on the things the organization feels are most important.

It can be challenging for any organization to design and introduce an effective new Sales compensation program. There will certainly be bumps along the way. It is all too easy to incent unintended behaviours if the program design has flaws. If the program is not well communicated or too complex your sales staff may not understand how it works. The way you go about introducing the program will play a big role in whether it ends up being successful or not.

Incenting behaviour may seem as basic as Psychology 101. Doing it right can be a significant enabler for your business. However, when implementing a Sales compensation program the devil is in the details.

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