When it comes to paying incentives, commissions, and bonuses, at a high level, we’ve seen success with the general rule “reward individuals for events, reward teams for processes”. But, there’s more precision needed to make incentive compensation plans produce the optimal strategy-aligned results.
Often, formal “Sales Teams” are functionally really “Service, or Relationship Teams”, where selling is but one (major, of course) aspect of the overall service expectations of customers. In these cases that means that “point in time” metrics/incentives have more relevance than typical “period of time” metrics/incentives: portfolio/relationship valuations vs. sales production volumes. Using the wrong metrics and incentives as they relate to both customer and workforce expectations, and to market/competitive conditions, will not yield desired strategic outcomes.
In some industries, straight sales/selling approaches create a disruptive, even toxic, set of outcomes related to “customer churning” and disproportionate costs of new customer acquisition vs. existing customer retention: where it is relatively less profitable to find and get a new customer than it is to keep and expand an existing relationship. In other industries, sales quality is as important as sales volume, if not more so. Obviously, pure sales production-based incentive compensation would be counter-productive in these environments.
From our vantage point, incentive, bonus, and commission compensation plans need to reflect not just overall enterprise strategic objectives, but also local market/channel Customer, Product, and Workforce Lifecycles; including full consideration of cross-dimension Customer, Workforce, Market/Competitive Profiles. Imagine mapping this on a three-dimensional cube with these elements as your axis points: the intersections within the cube represent each of your various local market incentive compensation strategies.
A single enterprise, with multiple business units distributed across a diverse set of local-market Customer/Workforce/Market Profiles, each at additionally diverse points in Customer/Product/Workforce Lifecycles, simply cannot succeed with a single, standardized incentive compensation plan. Such a simplistic plan would be functionally irrelevant (and non-motivating) to 75-85% of the participants.
Workforce performance compensation plans need to be specifically relevant to local multi-factor performance management conditions, or they won’t optimize performance and results of Key Customers and Top-Performing Workforce members, and they won’t help you successfully execute your strategy.