Today's blog post is by Christopher Cabrera, CEO of Xactly Corporation, the industry leader in sales compensation automation.
Tell me if this scenario sounds familiar.
You’re presenting your company’s new incentive compensation plan to the sales team. Before you’ve clicked through the final slide and turned up the lights, your sales reps are already manipulating the numbers up, down, and sideways.
I say this with love, but they are scheming to game the plan.
That light bulb that just went off? That’s the reps whose commissions are based on top-line sales revenue realizing they can close a lot of deals if they cut prices and undercut competitors. Result? They rake in the cash, while the company loses money.
The gal in the back who’s eligible for a monthly objective and achievement bonus? She’s got a big deal in October that will put her in her accelerators, so she’ll earn a nice fat check, then spend November binge-watching Netflix and shopping for the holidays. That’s a month’s worth of productivity and profit that your company will never see.
Situations like those are all too common, so it’s easy to see why company leaders try to stay a step ahead of reps to stop them from gaming the plan. You want your salespeople to be successful, sure, but not to the degree that it damages your bottom line.
I’ve thought about this problem a lot, and came up with my own solution:
Don’t fight it. Encourage them to game the plan!
It’s not as crazy as it sounds. See, the reason those examples are such lopsided win/loses isn’t because your sales reps are such a devious lot. It’s because without meaning to, you’ve created an incentive compensation plan that drives all the wrong behaviors.
What you want to do instead is build a plan that aligns the sales team’s goals with your broader company goals. Salespeople will still be motivated to earn as much as they can. But with the right incentive plan, the company benefits too. The more ways reps find to make money, the more your organization will earn. You’ll have nothing to fear.
OK, but how do you build the “right” incentive plan? Here are some ideas:
- Tap into the science of motivation to learn how to inspire employee performance.
- Gain valuable insight by measuring your company’s performance against empirical performance data and industry-specific benchmarks.
- Use data to get your sales and finance departments to work together on goals.
Those are just a few of the techniques I’ve learned about incentive strategies and employee motivation in my years in the compensation space. The rest, as they say, could fill a book. So at the urging of friends and colleagues, I spent this year writing Game the Plan: Every Sales Rep’s Dream, Every CFO’s Nightmare, to be published later this year.
In it, I take a comprehensive look at compensation and incentives, from the present back to the days when Captain Morgan had to incent his band of pirates to keep their mitts (hooks?) off the loot.
Visit the Game the Plan website for more information and excerpts.