In order to answer those questions, it is essential to understand how sales incentive programs work.  Indeed, only when you understand how something works can you begin the process of making it work better.

Let me begin by stating the obvious:  When implementing a sales incentive program you are expecting to get different results than the ones you would get without the incentive program.  And the only way to get different results is by changing the behavior of the sales people.  (Wasn’t it Albert Einstein who said, “Insanity is doing the same thing over and over again and expecting different results?”)

Since “different results” usually means “increased sales,” the question becomes: What aspects of a salesperson’s behavior, leading to increased sales, could conceivably be influenced by an incentive program?

In sales, as in all areas of endeavor, performance is a function of two basic variables: ability and motivation.  The relationship between these two variables is often expressed by the following equation:

Ability x Motivation = Performance

Ability is comprised of “can-do” factors, while motivation is comprised of “will-do” factors. For example, in the realm of sales, “can-do” factors include product knowledge, communication skills, and business acumen, as well as a person’s “natural, God-given talent.”  We all know people who were “born to sell.”   Examples of “will-do” factors include desire, determination, discipline, and the willingness to make sacrifices.

Since an incentive program cannot influence a salesperson’s ability, the behavioral change that we’re seeking to identify must relate to a salesperson’s motivation.

At the heart of every sales incentive program is a goal that one must achieve to qualify for a reward. In the same way that a certain scent can trigger a powerful emotional response, the simple act of providing a salesperson with a challenging goal has the potential to trigger a powerful motivational response.  Whether it does or not depends to a large extent on how the sales manager goes about setting and communicating that goal.

Savvy sales managers realize that the success of an incentive program is critically dependent on getting salespeople emotionally committed to achieving their goals. Perhaps Goethe said it best; “Until one is committed there is hesitancy, the chance to draw back, always ineffectiveness.”

These same sales managers also realize that there is a not-so-subtle difference between a “goal” and a “quota,” and understand that company-imposed quotas, though well-intentioned, can easily backfire and become de-motivational and a perfect example of the Law of Unintended Consequences.  The best way to inspire commitment is to include the salespeople in the goal-setting process.  Collective goal setting is empowering and usually very effective in creating a true sense of ownership and heightened accountability.

Commitment is crucial.  Without commitment there will be no significant change in behavior.  With commitment comes a change in behavior that is not only discernable, but also measurable. Salespersons who are emotionally committed to achieving a goal work harder and with more intensity than salespersons that are not emotionally committed. This is the behavioral change that is the cornerstone of every successful incentive program!

The term “working harder” does not necessarily mean some radical transformation in a salesperson’s work ethic. Indeed, just putting in an extra hour or two per day can have dramatic results on a salesperson’s productivity.

For example, let’s assume that a sales manager can “inspire” a salesperson to put in an average of one extra hour per day.  Based on a year that is comprised of 45 weeks or 225 working days, that one extra hour translates into an additional 28 working days per year. Two extra hours per day, which is not unreasonable, translates into an additional 56 working days per year.  That’s a whopping 25% increase in productivity.

Clearly, on any given sales team there will always be a certain percentage of individuals whose behavior will remain exactly the same with or without the incentive program.  Furthermore, working harder does not always generate more sales.  Even the most committed and talented salespersons don’t always achieve their goals.  The point is that working harder often produces more sales.  It all comes down to basic probability theory and the Law of Averages.

Now here’s the kicker:  On every sales team there are some individuals whose behavior you don’t want to change, namely the Peak Performers who are already working at maximum capacity and producing way-above average, if not extraordinary results. For these individuals, where working hard is part of their DNA and inextricably tied to self image and personal aspirations, incentive programs serve an entirely different and even more important objective:  employee retention.

The common rule of thumb is that 80% of your sales will be generated by 20% of your salespeople. Of course, the ratio is not always 80/20. Sometimes it is 75/25, 70/30, 60/40, or even 90/10. However, the situation the ratio describes is always the same: the vast majority of salespeople produce a fraction of what top performers on the very same sales teams produce.

The greatest source for sustained advantage is and will always be human capital and the success of any organization will always depend on the people it hires and keeps. Although layoffs, downsizing, and red ink might characterize the current state of corporate America, Peak Performers always have choices where they can work.  You know it and they know it.

Survey after survey cites “limited recognition and praise” as one of the most common reasons top-level salespersons jump ship.  In other words, retaining the best people is critically dependent on creating a corporate culture where the top performers are genuinely appreciated for their dedication and publicly recognized for their achievements. If you don’t make a habit of recognizing your top sales people, you can bank on the fact that somebody else will.

In the hands of the right sales manager, a carefully planned and creatively executed incentive program becomes a very powerful tool that can not only be used to generate incremental sales, but more importantly to create a “climate for success,” that is, a supportive work environment in which sales people can reach their full potential in achieving their own personal goals as well as the goals of the organization.

Success breeds success when a climate of success exists.