| Run a survey and one of the things you'll find about organizations that include salespeople is that some pay "commissions" and others pay "incentives." Organizations paying "incentives" (as opposed to "commissions") tend to offer those incentives to people on the lower rungs of the ladder. For example, banks often pay their branch reps incentives but pay commissions or bonus to commercial bankers. Paying incentives also often indicates a less professional attitude about selling. The sellers are thought of as beginners, or very reluctant sellers. If this describes your organization you may need to look at transitioning out of an "incentive"-based system. Here's why. You're Paying Incentives… For What? So, you're paying your reps incentives. Why? To encourage people to sell, you say? On the surface this makes sense, even according to the dictionary: in·cen·tive n. Something, such as a reward or punishment, that induces action or motivates effort. It may seem obvious: Organizations do indeed hope that incentives induce reps to sell-or at least motivate them to try. But we gotta ask: If their job is to sell, anyway, why nudge them to do it? The answer is usually that management fears that without such incentive sales reps won't sell as much as desired. Money is a Poor Motivator The truth is, very few high-performing professional sales reps are strongly motivated by money; fewer than 10% fall into that category. On the less-experienced rungs of the ladder, even fewer are motivated by the tiny dollars usually making up incentive programs. What money, awards, and recognition actually do is reward performance. In any case, for a strong sales culture, you need self-motivated, professional sales reps. Training Wheels, or a Vicious Cycle? Many organizations start paying incentives in an effort to bolster a nascent sales culture. It's a way to ease reps into the idea that they are required to sell, making incentives a set of training wheels. Take a look at the dictionary again, and you'll see that this intent matches the Latin from which we get the word "incentives": meaning "setting the tune." However, many organizations stick with paying incentives far beyond that set-the-tune, ease-in period. In practical terms, this helps create a vicious cycle: Incentives lose their power of motivation, and sales drop. In response, organizations adjust incentives; reps get bored with the incentives again; the organization responds... Focusing on incentives also sends a message that the reps are not professionals of whom you have professional-level expectations. Take a look at the points below, and you'll see how this message sabotages efforts to build a strong sales culture:
Training is key to developing professional skills. And, there are several simple things you can do on the pay-structure side to nurture your reps into professional salespeople. Stop paying "incentives" and start paying "commission." The language you use can make a huge difference! To avoid the message that you believe your sales reps must be prodded into selling, stop using a word that carries that implication. A "commission" is a fee or percentage paid to professional salespeople. Use that word when discussing pay of this sort, and use that word in written communication to your sales reps. Pay the same for most sales. Many organizations are selling hundreds of products and services. Their "incentive" bulletins can run two to ten pages of teeny, tiny type, and the dollar amounts vary per product/service. Some of the variance has to do with departmental budgets and--let's be realistic--political sway. I know it may be a tall order: If you really want your sales reps to sell as per each prospect's needs and interests (without focusing on a particular handful of products) then you should pay them the same amount for selling most products/services. This approach also does a better job of saying you want reps to sell as many products and services as they can to each prospect. Otherwise, reps can focus on the hottest product and make the same amount. Keep specials special. There are lots of good reasons to promote a particular product at a particular time, especially a new one. However, use promotions sparingly to avoid regressing and hoopla burn-out. Ease into using "quotas" if you've got quotas. Many "incentives" are calculated based on sales over a minimum. e.g., "$2 for every new account, after the first 10 accounts." If the above example looks like your communications, then you have a stealth quota. However, we don't recommend you jump right into actually calling it a "quota." For many sales reps, it's too scary of a word. You can help them get used to the idea by clearly showing the minimum amount when you communicate commissions. e.g., "Base: Ten accounts. $2 for every additional new account." Communicate. Be persistent through the learning curve. When you make changes to pay, even if all you're doing is changing the name from "incentives" to "commission," be sure to draw your reps' attention to it. Explain your reasons for the change in positive terms. You will also have to be persistent to ensure your organization completes its learning curve. It takes time to completely adjust language; reps will 'push back' against even positive changes; and results won't be instantaneous. Stick with it, and within about six months you will see your reps settle into being paid like true sales professionals. |