Top 5 Incentive Plan Mistakes During Slow Sales Cycles

The “economic crisis” over the last seven-eight months has driven many intelligent and successful HR managers, Sales Directors and business owners to make unfortunate mistakes when it comes to their sales force compensation plans. Caution: No cookie-cutter comp structure…no one-size-fits-all magic formula for the perfect sales incentive program…a variety of factors must be assessed when creating the most effective compensation and incentive plans for each particular industry, sales force structure and cycle of business. So, our list of mistakes to avoid these days includes some exceptions and is intended to assist as you evaluate and plan for 4th quarter and 2010.

1. Making major (and knee-jerk) changes…. Not only does it create more uncertainty for your sales force (and they spend a bunch of time figuring out how to manipulate the new, complex system), it makes recruiting great talent harder when they discover you’re making major changes all the time. Instead, assess options such as temporarily lowering thresholds or adding a team-based component to recharge the sales force.

Exception: Your incentive plan was already in need of an overhaul and an evaluation shows that it will need to change significantly even when the economy is strong and business is hopping.

2. Slashing the sales incentive (because it’s a major expense item…) Sadly, we’ve seen this mistake more frequently in 2009 as senior executives feel the media pressure from the extreme examples of executive rewards gone awry and CFOs/ COOs are squeezing the expenses to survive through the downturn.

Instead, freezing fixed salary increases and increasing recognition and reward is the effective way to counteract fear and inspire people to focus on productivity.

3. Letting the incentives be the “lead story” in your communications. Have you been doing a lot of explaining, rationalizing, clarifying, and even apologizing for lower incentive payouts due to decreased sales results – in writing and during sales meetings? Put it on pause! Shhh….can you hear them now? Yes, it’s your loyal customers saying “I’m over here – do you still love me?” And your competitors are quietly getting appointments with them. And your customer service support team is feeling neglected and unappreciated too. Seriously – stop the unnecessary “negotiating” with your sales force and instead, engage them as you make extraordinary service delivery with existing customers a primary topic of conversation.


4. Discounting the proven power of non-cash rewards/recognition
Instead of cutting back on recognition and the “fun stuff”, PLEASE do more of it! A nicely packaged and presented gift basket or gift cards creates more emotion (for the receiver AND their peers watching) than cash and shows more appreciation than the $26.50 you might have spent. Regardless of what people SAY they want (just give us the cash), studies prove over and over that non-cash recognition is a powerful motivator and boosts morale. And keep in mind, with products and services deeply discounted at retail, as they have been for several months, gift card recipients enjoy even more value.
Examples: A paid day off; gift cards that are personal (what the associate and their family just love); balloons, confetti and a serenade for recognition; a team BBQ or night out for a milestone achieved.

5. Paying for activities/behaviors vs bottom-line results. Serious faces, wrinkled brows, “resigning” mindsets…. If your environment turns into an intense “all hands on deck”, this is what your team will experience and see, in most cases. And too often, it results in either paralysis (“The business just isn’t out there right now) OR a whole bunch of activity that perhaps isn’t so smart (“l’ll just blitz the market and make a ton of prospecting calls to report”) You want to keep those top performers; you want to motivate the whole team to get out there and follow that sales process. Sure! Changing the comp plan to pay cash for activities violates one of our “golden rules” and yet in times like these, it can be effective on a temporary basis. Proceed with caution and:
· Define very specific sales process step(s) or skills/behavior(s) you know will bear much fruit with an intense focus. Examples: product presentations to a target market; qualifying leads; specific kinds of outbound calls
· Plan for a ~60-90 day focus that includes both a clear picture of what success will look like (demonstrate it) and a training/coaching component. Use the temporary focus time to really invest in your team’s skill development.
· Do a robust job of de-briefing – create a culture where it’s expected and frequent. Drawing out what specifically worked, WHY it worked, what didn’t work, what would be done differently next time, etc. is a great learning opportunity for the organization and keeps the sales force moving, engaged and learning.

Common themes:

• Whether business is booming or sales are plummeting….your sales and service associates are always most productive when they feel respected for their work and recognized for their efforts and contributions. You’ll only get through the economic downturn with great PEOPLE on your team – and when we reach the other side, you’ll need these great people on your team poised to hit the ground running.
• Tweaking the comp and incentive plans is inevitable and appropriate this year. Slashing and burning is risky and the negative consequences are usually very challenging to recover from.
• Do not stray from the golden rule – pay (cash) for results, not for activities or behaviors. Exception: Short-term rewards and recognition for specific activities or skills demonstrated can work.