A well-designed sales incentive program can be a powerful tool for driving performance. It focuses a sales force on company priorities and motivates behaviors to attain desired business results. Offering the right compensation is also crucial for attracting talent and retaining a quality sales force.

Most incentive plans are variable in their design, mixing base salaries, commissions, and bonuses in a compensation scheme. Plans may reward payouts for a variety of criteria, such as attaining new business versus signing repeat customers. And they can be linked to individual results, team performance, or both.

However they’re crafted, organizations can improve the effectiveness of their incentive plans by recognizing and addressing a few basic realities.

1. If there’s no alignment, there may be no valuable return on the investment. Plans designed to motivate sales performance may stand in direct opposition to the overall corporate strategy. A company should ensure that its sales compensation helps it to achieve its goals by aligning incentive plans with overall strategic objectives, including goals for product mix and profitability.
   
   
2. You get what you pay for. Want increased sales from a new product line? Make sure incentives support new product sales instead of favoring existing product sales. Likewise, an incentive plan that rewards sales volumes may do so at the expense of more profitable lines of business, or it can hurt customer service. Companies should reward the results it needs.
   
   
3. Plans can fail if they’re too complicated. If salespeople don’t understand what’s expected of them, or must compute their earnings with a complex maze of suppositions, you’ve created a disincentive. Keep plans simple – three metrics or less – and develop easy-to-understand formulas for calculating rewards.
   
   
4. Not all salespeople are motivated the same. Offer a variety of motivations and reward opportunities, while keeping the plan in line with both organizational goals and salespeople’s desires. 
   
   
5. Some plans are downright unattainable; others merely reward standard performance. Most salespeople enjoy a challenge. Goals should stretch their potential, without being impossible. Design a plan that makes overachieving a worthwhile proposition.
   
   
6. There’s more to it than money. Salespeople thrive on recognition, much of which can be offered at little or no cost. Get creative with low-cost motivational techniques. Imaginative contests that reward winners with public recognition are simple and highly effective ways to inspire achievement.
   
   
7. Plans aren’t self-sustaining. No matter how great the design, an incentive plan must still be properly implemented and managed. Be diligent in its promotion, administration, and in tracking results. Deliver rewards to salespeople in a timely manner to maintain their enthusiasm.
   
   
8. Plans must evolve. Inevitably, your organization, industry, and strategy will all change. Sales rewards must also be revised alongside the new directions.