More than 8 years of accumulated big data delivers intelligence and best practices to organizations in all sizes, industries. These are the seven practices that our data shows work against you in your quest to incent right.
If your incentive compensation plan has six or seven components, your sales team won’t know where to focus. Worse, you could be using your plan as a quasi-manager to compensate for weak leadership.
7 Deadly Sins of Incentive Compensation
POOR ALIGNMENT WITH
plans tend to be aligned
objectives at the
strategic level, but the
devil is in the details.
Misalignment creeps in
when individual plan
with broader goals.
Look at the components of
your incentive compensation
Map them back to your
business objectives to make
sure they don’t inadvertently
If your incentive
has six or seven
sales team won’t
know where to focus.
Worse, you could be
using your plan as a
compensate for weak
1 2 3 4 5
Shoot for three measures in your incentive
compensation plan. Pushing that to 4 or 5 is
sometimes justified, but when you hit 6 and
7, employee performance drops dramatically.
How many checks do you cut on a single sales
deal? A few? A few dozen? One hundred and
If you’re paying team members whose
contribution isn’t clear, then there’s a good
chance you’re overpaying, and that the link
between performance and payment is broken.
About 75% of companies pay five people on a
Stay up to date on who contributes, and
develop a pay structure accordingly. Let
incentives drive and influence specific actions.
These discouraging practices summon the
wrath of the sales team and weaken the
connection between behavior and reward.
Drop those infernal caps. They
prevent sales reps from
reaching their full potential.
Drop the holds. Don’t turn your
sales reps into collection
Pay on time. Paying months in
arrears is demotivating.
Unexpected payouts to sales reps
can cut into your business’s profits.
Example: Accelerators. They’re a
great tool for motivating your team
to sell more, but you have to keep
your eye on the budget
Avoid unpleasant surprises by modeling
not one, but several budget scenarios in
your plan-design phase. Try these three:
1. What do you expect your sales performance
2. What if a few high performers carry the
company and earn far more than planned?
3. What if a big percentage of reps outperform
It’s good when your gut tells
you that your organization is
doing great, isn’t it?
A solid incentive
compensation plan is built
around data, not intuition
derived from hard
data to measure
Use the approach that’s right for you:
benchmarking against an aggregate
group, against industry standards, or self-
benchmarking against company goals.
A solid foundation of data is
one of the “thou shalt
haves” of business.
If information you need is
swirling around a murky
pool of data, then your
compensation plans more
than likely are based on
intuition rather than
facts, and audits will be a
Ensure that anyone who
compensation can trace
every payment back to
a particular behavior or