1. Incentive Checklist
A brief assessment of Staff Sales Incentive programs
Ranjeet Deshpande
Independent Sales Effectiveness Consultant

2. Why this checklist?
 Sales Incentive programs are susceptible to both under and over-design.
While a majority of firms in India employ some or the other type of sales
incentive program, the program design is often adhoc.
 It is common to find companies running a token incentive program that runs
in the background with little traction amongst participants. And it is equally
common to find companies trying to link too many objectives to a single
payout, often turning this carrot into a stick.
 If you are amongst those that believe that a well-designed incentive program
can evolve into a long-term driver of behavior, culture and value, I invite you
to go through the following simple checklist. If you are surprised by your own
answers, perhaps its time to seek external intervention to realign and
rebalance your organization's performance pay program.

3. Q#1 Are you incentivizing the right metrics?
A manufacturing co. that I advised paid commission on every sales booked
by the Sales Exec. But dispatch of around 20% of orders would be delayed
(and cancelled) meaning that the firm overpaid for those orders. 15% orders
were booked at a higher discount than was approved by management but
the Sales Exec earned the same incentive for those orders. 85% of the
orders are coming from the top10% of the dealers increasing the firm’s
concentration risk but the Sales Exec had no motivation to broad-base sales.
A) Is your co. too paying sales reps incentive for low value/non-target sales?
B) Is your incentive program addressing both results (revenue) and effort
(broad-basing)?
C) Have you articulated your sales strategy and ideal sales behavior to which
your incentive design can align?

4. Q#2 Are the metrics measurable and
controllable?
I am aware of a bank that pays extra bonus to its RM each quarter, if the
customer satisfaction for the RM's branch is above a certain level. But
surveys showed that customer satisfaction score was more closely linked to
the location of home branch and the branch’s ambience which has nothing to
do with the RM’s effort. Another bank I know pays incentive based on market
share of the bank in a given area. However, there is no defined way of
calculating market share.
A) Is your co. also offering the incentive lottery with metrics over which the
individual payee has no control?
B) Are vague and difficult-to-measure metrics affecting the overall credibility
of your incentive program, in the eyes of the participant?
C) Some metrics may be affected by group’s performance. In such case an
individual payee has some but not complete influence over the outcome.
Have you identified special design elements for such metrics?

5. Q#3 Is Leadership talking about incentives?
In a brief telephonic survey that I did for a book store chain, I found that only
59% of the staff knew that there was an incentive program that was being
run and only 18% of the staff knew where they stood in terms of target
achievement. Most sales reps considered the program to be a 'black-box'
and had no idea how the incentive is calculated, although the plan design
was rather simple and as a result did not try to "go for it“. Since leadership
did not communicate the plan and its importance, no one down the line did
either.
A) Does your company leadership invest time to communicate to the sales
organization, the incentive plan and interim achievements?
B) Do payees have a helpdesk they can turn to resolve incentive-related
queries?
C) Is there a dip-stick test available to gauge immediate reaction to the
incentive plan, basis which leadership can customize its communication?

6. Q#4 Are you paying enough to motivate your
best people?
My friend runs a Hyundai car dealership that enjoyed high levels of staff
retention during the recession period of 2008-10. But in 2011, annual sales
staff attrition jumped to 35%. Nearly all those who left were meeting targets
but were dissatisfied by the incentive program. The fixed salary was
competitive and targets were realistic. However, the plan design did not offer
enough scope for high performers to earn significantly higher payouts.
A) Are you top performing salesmen motivated to reach higher earning
brackets?
B) Does your incentive plan have roll-over/cumulative components that can
sustain the interest of high performers?
C) Does you target setting, incentive slabs and/or recognition components
encourage high performers to consistently put more and more distance
between themselves and the rest?

7. About Ranjeet
Ranjeet is an expert in Sales Effectiveness and Sales Performance
Management with over 12 years of management and internal consulting
experience. He specializes in Sales Incentive Management and Rewards
Outsourcing and believes that Indian companies – both small and large must
embrace contemporary Rewards Management practices to create and retain
their advantage in the increasingly complex and competitive global economy.
You can reach him on ranjeet.deshpande@gmail.com