Are you confident your Sales Incentives are driving the right behaviors for your company's future ?

It's the time of the year when many businesses are holding their Sales Kick-offs, outlining what products, services and solutions they will be pushing to the market for the year ahead and putting in place the 2025 Sales Targets which should drive the Sales efforts for the year.

Of course in an ideal world all of this would have been completed in Q4 2024 and the Sales Plan would already be in place so the team could hit the ground running from early Jan but that is another discussion completely and in reality the focus on closing out the current year as strongly as possible nearly always supercedes the planning for the following year.

In today's dynamic business environment, having a strong sales team isn't enough – you need a Sales Incentive Plan (SIP) that perfectly aligns with your company's strategic objectives. A well-designed SIP isn't just about motivating sales teams; it's a strategic tool that can either accelerate your company's evolution or unknowingly hinder its progress.

The Strategic Impact of Sales Incentives

Think about it - your sales team is effectively your company's army on the ground. Their actions, driven by how they're incentivized, directly shape your market position. A misaligned incentive plan can be like giving your army the wrong map – they might be moving fast, but are they heading in the right direction?

On the other hand a well defined incentive plan will offer clear direction to a Sales team, will identify the priorities for the business evolution & growth required and will provide the individuals within the Sales team with a financial motivation to succeed based on achieving those strategic objectives.

Common Pitfalls in Sales Incentive Design

Corporations have typically invested a lot in designing SIP Plans but sometimes the implementation of these plans can still come down to individual management interpretation and prioritization while many Small-Medium Enterprises can fall into the trap of creating one-dimensional incentive plans. One example of this is the SIP Plan that is focused solely on Revenue targets and while revenue is crucial, this approach can lead to:

• Short-term thinking that sacrifices long-term customer relationships
• Focus on easy wins rather than strategic accounts
• Neglect of new product lines that are crucial for future growth
• Resistance to innovative pricing strategies
• Customer churn due to overselling

It is important to consider the stage of evolution of the business and whether the priorities for the year ahead are to grow market share with existing Products & Solutions ( in which case a Revenue focus might actually be necessary ), improve overall Margin, break into existing Customers with new Products & Solutions or break into completely new Customers with more of a Business Development approach.

What is critical is when creating the Incentive Plan that the business asks itself the right questions including what are the behaviours it wishes to drive through this Plan i.e. :-

• Is the Sales approach going to be primarily about driving volumes & leveraging discount ?
• Is the Sales approach going to be more consultative and take longer ?
• Will a more detailed knowledge of the customer's business be required than in previous years ?
• Who are the key stakeholders the Sales team will need to engage with internally in order to achieve their objectives ? i.e. Manufacturing ? Product Development ? Supply Chain ? Bid & Quote ? PreSales Engineering ? Marketing ? Professional Services ? Finance ?
• Will innovation be required in terms of pricing or other financial incentives for the Customer ?

Once it is clear what the overall objectives are and what type of Sales behaviours will be required it is then necessary to put in place the right environment and support structure required to execute.

The Elements of a Strategic SIP

A well designed Sales Incentive Plan should be all about balancing multiple different elements and should :-

1. Mirror Corporate Objectives

If your strategy emphasizes new market penetration, your SIP should reward the extra effort required to win new logos. If customer retention is crucial, ensure your incentives reward account growth and renewal rates.

2. Balance Multiple Priorities

Consider weighted metrics that include:

• Revenue achievement
• Profit margins
• Strategic product mix
• Customer satisfaction scores
• New market development
• Solution selling effectiveness

3. Evolve with Your Business

Your SIP should be dynamic, adapting to:

• Market conditions
• Product lifecycle stages
• Changing competitive landscapes
• New strategic initiatives

Implementation Best Practices

Success in SIP design is not going to be based on simply creating a SIP Plan, rolling it out and then letting it run until the same time next year. Instead it should factor in :

• Regular review and adjustment cycles
• Clear communication of objectives
• Simple, understandable metrics
• Fair and achievable targets
• Tangible incentive to over-achieve ( see Performance Acceleration Curve below )
• Proper sales enablement support
• Access to the Sales numbers and reports such that both collective and individual performance self-measurement vs targets can be continuously monitored throughout the year

The incentive to over-achieve against target and not "ease off" once target has been achieved should also be a strong element of a well designed SIP Plan. The motivation to over-achieve should in most cases be stronger than the desire to ease off and get a better start to the following year and this requires careful balancing such that accelerators are used effectively.

The Tools to Measure & Monitor

In any Sales organisation it is important that management have access to the right reporting tools and dashboards such that they can see the overall Sales performance versus forecast but also that the members of the sales team can see their own individual performance.

Knowing which customers are up or down against forecast will help the individual members of the Sales team to decide how to adjust their efforts and focus in order to re-align with their Sales targets and also re-align with their own desired financial incentive.

The Financial Impact

A strategically aligned SIP isn't just about sales performance – it's about financial efficiency. When your incentives align with corporate strategy, you're not just spending on commissions, you're investing in strategic execution of your overall business plan.

Looking Forward

The most successful organizations treat their SIP as a living document that evolves with their business strategy. Regular reviews, open dialogue with sales teams, and alignment with corporate objectives ensure that your sales incentives remain a powerful driver of strategic success.

Your Sales Incentive Plan is more than a compensation tool – it's a strategic lever that can drive your organization's evolution and growth. When properly aligned, it transforms your sales force from a team that chases numbers into a strategic army that builds your company's future.

Ask yourself: Does your current Sales Incentive Plan truly reflect where your company needs to go, not just where it's been ?

John Flynn is a business growth consultant with over 25 years of corporate leadership experience in Professional Services, Solutions Sales and Sales Operations and is now helping businesses of different sizes to drive effective growth strategies that blend traditional sales excellence with modern tools and methodologies. John has worked with multiple different companies to create effective Sales Incentive Plans and if this is an area where you feel you would like to put some focus John will be happy to have a conversation.