Question: Has your Sales Organisation designed an incentive programme built on multi-tier sales targets tailored to incentivise star, core and under-performing sales executives, and are your current incentive programmes and sales targets effective in encouraging the right behaviours and attainment of revenue goals in all of your sales executives?
According to our research at ThinkSales Global, only 32.8% of Sales Organisations have designed an incentive programme built on multi-tier sales targets tailored to incentivise star, core and under-performing sales executives.
In addition, 32.2% of companies rate their confidence as Outstanding that their current incentive programmes and sales targets are effective in encouraging the right behaviours and attainment of revenue goals in all of their sales executives.
The ‘Extrinsic Motivation’ Problem
According to Michael Ahearne, a Professor of Marketing and C.T. Bauer Chair in Marketing at the University of Houston and author of Selling Today: Partnering to Create Customer Value, the highest grossing professional selling textbook in the world, many more sales professionals are missing their targets over those who make them – and the problem often lies in how they are motivated.
Ahearne’s research reveals that most Sales Organisations follow the same pattern:
- There are three core groups in a sales force: Laggards (20%), core performers (60%) and stars (20%)
- Despite these three clear groups, many organisations have imbalanced compensation plans.
- One standardised compensation plan does not take these differences into account (and as we’ve already seen, it doesn’t take into account the fact that different people have different intrinsic and extrinsic motivators.)
This means some people are winning every time, but many more are losing – you’re not motivating them.
In other words, if you want your sales force to win, you can’t rely on them to just be self-motivators – how you incentivise and motivate your sales executives plays a large role in their success.
Motivate your laggards, core performers and stars
- Quarterly performances work best, as they help laggards plan their targets and time. It’s a more immediate goal.
- Social pressure has been found to motivate laggards:
- Confidential, relative feedback results in the lowest level of social pressure.
- Instead, use stacked rankings, which make it easy to see where each exec stands, highest to lowest.
- Worst to first: This switches the ranking from lowest to highest performer. This switch leads to as much as a 4% increase in lowest performers, because no one wants their name on top. People/colleagues ignore the bottom of lists – the top is hard to ignore.
- Wall of shame. This is real social pressure to push results. It can be extremely effective, but only if handled with care, and only after rigorous pilot testing.
- The ‘Man on the bench’ strategy: Can lead to big sales increases because laggards fear for their positions.
- Core performers make up the vast majority of every sales force.
- If you can move the needle with 60% of your sales force, how will it impact your revenue?
- Challenge: Compensation plans tend to be geared towards star performers rather than core performers.
- The result? Core performers feel like they are always just missing the mark, that the compensation plans are unfair, and that they can’t achieve what they deserve.
- Core performers will never be top stars, so there still has to be a way for them to feel victorious, without competing on the same level (and for the same prize) as star performers.
- Multi-tiered targets can work extremely well in this regard. With goals within reach, average people achieve extraordinary things.
- This is a risk area/group because they are highly sought after – which means you need to keep them happy, motivated and incentivised.
- It’s a bad idea to set or cap targets as you are effectively capping their selling possibilities by giving them a ceiling. By setting caps on commissions just as stars are getting hot, you’re effectively encouraging them to stop selling. There’s no cost benefit to this either – the more they sell, the higher your revenue.
- Implement a ‘super bonus’ instead
Capped stars achieve 17% less than uncapped stars.
To motivate your entire sales force, instead of just your star performers, implement the following strategies:
Social pressure tactics to improve performance
- 1st tier: Set at a point that the majority of sales execs in the company have historically attained
- 2nd tier: Reached by a smaller percentage of the sales force
- 3rd tier: Hit only by the company’s elite.
- Simply having tiered prizes doesn’t work for core performers
- The top prizes will go to the stars, and so it’s not a strong motivator
- But, if you offer lower-level prizes (not cash, cash doesn’t work, because less cash can never be seen as the same as, or more than, more cash) that can be seen as the same as, or equal to, higher prizes, it will work.
- No ceiling on commissions
- Over-achievement commissions
- Multiple winners
Assess the health of your sales organisation
Designing an incentive programme built on multi-tier sales targets tailored to incentivise star, core and under-performing sales executives and ensuring the programme is effective are two of 322 measures of a world-class Sales Organisation.
How does your Sales Organisation stack up? Find out by taking the ThinkSales 5 Pillar Strategic Sales Assessment™.
This first-of-its-kind 360-degree gap analysis report enables your Sales Leadership team to assess its strengths and detect weaknesses and impediments to revenue growth across the five pillars of a high performing sales organisation:
- Competitive Strategy
- Customer Engagement
- Sales Talent
- Sales Management
- Sales Enablement
Click here for more information on the ThinkSales 5 Pillar Strategic Sales Assessment™.