Plotting a course through market uncertainty: will your incentives drive sales?

Quotas are typically set at the start of the financial year, so it’s very unlikely that they factor in the economic changes we are now seeing.

However, given the continuing level of uncertainty, it’s probably not the time to make knee-jerk changes to quotas. Any adjustments should be carefully calibrated.

Current quotas might now be overstated or, in some cases, understated. If they are overstated, and now seen as unachievable, there’s a motivational risk: the sales force may simply give up on trying to achieve them.

If quotas are understated, they will be too easy to deliver and could lead to unjustifiably high pay-outs.

If uncertainty means that you don’t want change quotas, you could consider changing plan mechanics.

If sales are more unpredictable, it could be worth creating a broader, more forgiving payout curve with a lower threshold (e.g. where payments start earlier) but also with a higher excellence point (e.g. where you want to pay top performers to earn 2-3x the target bonus) – so bigger pay-outs need higher performance.

This helps even out unpredictability. Where quotas are more challenging, the sales force will have a lower threshold to aim for, helping to maintain motivation.

Another way to maintain motivation can be to introduce a short-term competition (sometimes called a ‘SPIFF’, Special Incentive for the Sales Force). These typically have different mechanics to the core plan: e.g. top 5-10% of salesforce; most improved sales performance etc.

Done correctly, these types of incentives can be highly motivational and could help provide a focus on retention, key clients or products. However, a word of caution: they should not take focus away from the core sales plan/process but rather work in harmony with it.

It is typically much harder to bring in new customers and retain existing clients, so in tough times there should be an increased focus on retention and upsell. It is also important to focus on opening up customers who are buying to other service lines, so ensuring that your schemes have mechanisms to encourage cross sell can also be vital.

In a tough sales environment, it is important to focus on the best/most likely opportunities.

In good times a scattergun approach to sales can be successful. In tougher times, the best salespeople will invest time on better opportunities, which are likely to yield better results. It may also be better to focus on higher margin sales or strategic sales that make customers more ‘sticky’ and likely to buy in the future. Sales incentives can support a re-designed sales process by paying more or crediting more for specific types of sales or sales to certain types of customers.

About the author: Scott Cullen is a Partner in the Reward Consulting practice at KPMG. He is a specialist in sales incentive design, having designed hundreds of schemes across industries over the last 25 years. If you have any questions for Scott, please send them to scott.cullen@kpmg.co.uk.