Sales incentive plans in volatile markets

Setting the right incentives is more important than ever

In uncertain economic times, having an effective incentive system for your team is crucial. Incentive systems are essential for boosting employee motivation and driving the achievement of sales targets. They serve as a pillar, ensuring that employees remain engaged and perform well, even when facing economic uncertainty and away from headquarters leadership oversight. Moreover, during such periods, flexibility of incentives is vital in providing support for short-term goals and overall business stability. Last year’s growth goals may pivot to this year’s retention goals and it’s your incentive systems that play a key role in optimizing the use of sales resources, especially when resources are limited.

Agility and alignment with corporate strategy are key

An intelligent incentive system must be agile enough to align quickly with the company’s evolving strategies. This adaptability ensures continued alignment between the incentive structure and changing corporate objectives. In challenging economic conditions, aligning the incentive system with core business goals becomes especially important, helping to prioritize sales efforts effectively and use sales resources efficiently. The system should also be dynamic, able to tailor incentives to individual roles based on their assignments, specific sales territories, and market conditions. This often manifests in a system with multiple metrics, such as the example below. A single-metric system lacks the agility to keep up with a volatile market, but remains a common approach given its popularity during the relatively calm 2010s.

4 success factors for developing successful incentive systems

The development or revision of such systems should be guided by critical success factors:

1. Clear and measurable goals must be established, aligning with the company’s overall strategy and easily understood by employees. This can be tested with an internal survey of sales representatives and pay:performance correlations.
2. The rewards offered should be ambitious yet achievable, avoiding excessive or unattainable incentives. In many cases, this translates to 60-65% of the sales force achieving targets in a given year where the overall company achieves the business plan.
3. A robust performance tracking and measurement system is essential to provide transparency and encourage performance improvement.
4. As already mentioned above, the system should be flexible, capable of adapting to changing market conditions and evolving company strategies to remain relevant and effective.

Nudge your team to enhance your incentive system

To further enhance your incentive system and motivate your team with a combination of long term and short term mechanisms, consider incorporating gamification elements, such as contests, challenges, or leaderboards. Be mindful that the payouts of these components should never overshadow the primary incentive plan (i.e., best practice is to allocate 10% or less of earnings to these kinds of programs), but when used correctly these elements foster healthy competition and ambition among employees. You can also introduce time-limited boost factors for specific achievements to incentivize extra effort or sprints. Implementing peer recognition programs, where employees can acknowledge outstanding accomplishments among their colleagues, cultivates a positive work environment and reinforces camaraderie. Organizing inter-team or competitions across departments promotes teamwork and collaboration. Finally, providing platforms or tools for employees to share their progress and achievements allows them to inspire and motivate each other, enhancing team dynamics and overall performance.

How we can help

When it comes to sales incentives, Simon-Kucher is your trusted partner. We understand the unique challenges of volatile markets and evolving corporate strategies, ensuring that your incentive system remains agile, aligned, and effective.  We have designed hundreds of sales incentive programs to drive growth, increase profitability, support mergers, and attractand retain top sales talent.

Based on our decades of expertise in industrial markets, we can help you add 5-10% of incremental revenue in the first year after implementation while supporting a positive sales culture. To explore how our specialized insights can transform your sales incentive strategies, reach out to us today.