Activity-Based Reward Plans: 4 Basic Dos and Don’ts

By Heather Baldwin  •  February 15, 2010

Are you skeptical about the value of attaching incentives to sales activities rather than to revenue? If so, you’re not alone. Alan Rigg, author of How to Beat the 80/20 Rule in Sales Team Performance: A Step-by-Step Guide to Building and Managing Top Performing Sales Teams (80/20 Performance Publishing, 2007), says that managers frequently complain to him about “reward overkill.”

“A common objection is, ‘Why should I pay salespeople an incentive for something they should be doing anyway?'” he says. “This is a valid question. But a related question that’s equally valid is, ‘Is your compensation plan designed to encourage salespeople to perform enough of the right activities to accomplish the desired sales outcome?’ If it isn’t, activity-related incentives can help motivate desired behaviors.”

So what does it take to roll out a successful activity-based incentive plan? Xactly Corporation founder and CEO Christopher Cabrera, who has more than 16 years of senior management experience in sales, marketing, and business development, offers the following tips:

  • Don’t use an activity-based incentive plan for senior sales reps or big-time closers.
    These programs are best for inside sales teams or call centers. “Activity-based compensation works better with younger, less experienced teams,” Cabrera says. “Senior, seasoned sales professionals are going to be turned off by that type of compensation. They want to get paid for closing deals.”
  • Do make the program visible online.
    What good is dangling a carrot that no one sees? “Nine times out of ten, management thinks it’s created this wonderful bonus or program, and you talk to individual reps and they have no idea it’s there,” Cabrera says. “An automated, Web-based program allows people to see, ‘OK, you asked me to make ten calls, and I made eleven,’ or ‘I’m down five calls; I’d better get my act together.’”
  • Do ditch the Excel spreadsheet.
    It’s vital to have an understanding between reps and the company about what the goals are and how they’ll be measured. That’s hard to do with a spreadsheet.

    “Excel is great, but it wasn’t designed to manage sales teams in this way,” Cabrera says. “For anyone using Salesforce.com, they can go to the Xactly app exchange, sign up, and get it working. No implementation. The hurdle isn’t nearly what people think it is, and the benefits are huge.”
  • Don’t use activity-based rewards as a substitute for good management.
    Rewarding reps for a certain behavior is OK, as long as it’s not a stand-in for the kind of good management salespeople need to ultimately make quota.

    “A lot of companies will use incentives on things like call reports, so that at the end of the week a field guy has to say, ‘I visited these ten accounts,’” Cabrera observes. “But the amount of money that you have to motivate a behavior is so valuable, to use it on, ‘Is your CRM system up-to-date?’ is a waste. I’m not saying that getting [salespeople] to use CRM or make a certain number of calls a day isn’t important, because those behaviors can lead to sales. But don’t water down the power of your incentive program by asking it to do what good management should be doing already.”

Anthony Cole, of the Anthony Cole Training Group, agrees with Cabrera on this point espectially. No matter what, he says, solid sales management is fundamental if managers want to create winning sales teams. No incentive program should be considered a replacement for a steady diet of coaching, assisting salespeople with developing prospecting messages, managing their territories, finding and qualifying opportunities, and all the other skills at which top reps excel.

“This is a puzzle with many pieces,” Cole notes. “If a sales manager is masterful about helping salespeople discover why the activities are meaningful to their individual success, and he or she is also good at coaching and motivating, and the company has a meaningful incentive program, then this kind of incentive will work, and you’ll see the results you’re looking for.”

For more information, visit www.xactlycorp.com,www.anthonycoletraining.com, and www.8020salesperformance.com.