If you do not have an incentive program or an Incentive scheme that Works, you will need to build a business case that you can present to management. The key to doing this and achieving the desired outcome is not to be too ambitious. Start with small increases over your current forecast and instigate a moderate incentive payment.
Management usually buys into a program that improves profitability, so the key here is balancing the profit generated from the additional sales against the commission paid.
Approach one of the key people in the finance division and ask them to run some financials for you on 105% of the forecast with the cost of sales removed from the additional 5%. The answer is the number you can play with regarding incentive payments.
The objective of any sales incentive program is not to achieve 100% of your sales forecast but to push the team into what I call the “Sweet Zone”, which is between 105% and 110% of your regional/state/national forecast.
Following is an outline of a workable incentive scheme.
The program starts at 95% and has a ceiling of 110%.
If you have a salesperson who exceeds 110%, I suggest you make a provision to pay a nominated bonus awarded at the Sales Manager’s discretion.
All commissions would be calculated on an accumulative basis.
The beauty of this simple methodology is that it is impossible to overpay commission, and as long as the salesperson is earning commission, they are incentivised to stay ahead of their sales forecast.
Finally, the overriding consideration agreed to by the salesperson before being allowed into the incentive program is that if they leave your employment before the end of the commission year or fail to maintain their year-to-date sales to forecast, all overpaid commissions will be deducted from their salary at the time of separation or the end of any commissionable year.
To prove this theory, I developed a spreadsheet that pays $100 per every percentage point between 95% and 110%. The salesperson achieved 125% in the first month and 120% accumulatively for the next two months, crashed to 94% YTD for the next two months, crashed again in the ninth month to 94%, and finished the year at 105% of the forecast.
Commission Calculator
If you would like a copy of this spreadsheet, send me an email, and I will be happy to forward it to you at no charge.
It is important to note that each member of your Sales Team may have different incentives that incentivize them, forming a path to results. Finding out what that is will be a challenge worthy of your time. Identify this, and you can push into the sweet zone with every sales team member.
You may want to consider one or more of the following incentives to boost morale, unify the team, or just as an inspirational gift for a job well done.
- Gift cards
- Fine dining experience
- Entertainment tickets
- Tech gadgets
- Spa Day, Round of Golf, or other activity
- Wine Club Membership
- Travel vouchers for a weekend getaway
