Meaningful Rewards

A sales force without incentives is like a car with its fuel light indicating empty: destined to run out of gas before reaching its end goal. Incentives keep salespeople motivated and provide managers with a way of saying "thank you" to hard-working performers. But structuring rewards to satisfy short-term goals, rather than to produce overall effective outcomes, can result in unsatisfied salespeople or, worse, customers. Here are four rules to live by when constructing your next incentive program:

BE FLEXIBLE
By focusing incentives only on year-end results, managers effectively "train customers to buy when [the sales force] wants them to buy, as opposed to when [the customer] wants to buy," says Mitchell Goozé, president of Customer Manufacturing Group, a marketing and sales consulting company based in Santa Clara, California. "I have seen salespeople irritate customers by holding orders so that they could put [a sale] in a certain bucket and get a reward," Goozé says. To keep reps focused on building loyal customer relationships, managers should scatter incentives throughout the year.

BE ALIGNED
Incentives should be aligned with the objectives that managers outline at the beginning of each year — not simply reward reps for pulling in the most money. "[Managers] are getting smarter about defining standards, but a lot of the behaviors that managers are looking for" are not incentivized, says Eric Gist, a Los Angeles–based partner in management consulting firm Accenture's sales transformation group. For example, "Some industries are moving from a volume focus to a margin focus and yet, they are not even close to compensating [salespeople for growing] that margin," Gist says. Make sure incentives reflect what's really wanted out of the sales team.

BE CREATIVE
"If you link incentives to nothing other than dollars, you're effectively saying that you don't care how [salespeople] get the money," says Francie Dalton, president of Dalton Alliances Inc., a consulting firm based in Columbia, Maryland. "That's not the message you want to send," she says. By constantly coming up with new and personalized ways to reward salespeople, managers demonstrate creative leadership and compassion. "An incentive for one person could be one thing — like a better option on his 401(k) — and for another, it could be something completely different," Dalton says.

BE UNIQUE
And while sharing ideas among industry peers can help with developing incentive programs that are on par with competitors', a manager should not lose sight of his company's individual needs. "You don't buy sales force effectiveness at Wal-Mart," says Jim Dickie, partner at CSO Insights, a sales and marketing benchmarking firm based in Boulder, Colorado. "It's different for everyone." Incentives that breed sales force effectiveness reflect that.

—Sara Calabro