Businesses of all sizes working in the increasingly global marketplace of today have to find practical, effective, and optimal ways to continue to grow and expand their customer base. In virtually all markets, it is the sales team that is the cornerstone of growth and market expansions.

What about Incentives?Incentives

Many businesses have used structured sales compensation plans with intriguing incentive programs for years, assuming that with the right carrot dangled in front of the sales force and the right driving force they would be motivated to achieve higher sales.

The interesting finding is that companies using incentives and not offering sales coaching don’t see the improvements that would be reasonable to expect. This is true for incentives for individual improvement bonuses as well as for meeting specific quotas set for a group.

In a new study completed in India, several assumptions about the effectiveness of different types of bonus or incentive programs were finally empirically measured. The study, “Incentives versus Reciprocity: Insights from a Field Experiment”, completed by Doug Chung and Das Narayandas, looked at several incentive programs and their impact on sales teams.

The focus of the study was on cash bonuses, and how they were provided, with the final results being tabulated as to the effectiveness of the different options. When the study discovered was very insightful and only further highlights how an effective, structured sales coaching program is more effective than simply handing out cash.

The researchers worked with one company that had multiple locations and with a desire to increase overall sale performance. What the researchers found was that having a quota for a sales person to obtain to achieve a bonus was more effective than simply providing a bonus.

When there was a specific quota that had to be met, the sales staff rose to the challenge and showed almost a 20% increase in sales. When the bonus just happened without any consistent requirement there was less than a 10% increase in sales and in some cases  a negative result.

They also experimented with other options such as giving the bonus and then taking it away, or adding it to the next paycheck and taking it away if the quota wasn’t reached the week. The results for these two always produced less positive results, showing that simply providing money didn’t motivate the sales staff.

However, even when the bonus was provided and then would be removed the following week if the same percentage over quote wasn’t achieved, it was the high performers that boosted their performance. The mid to low performers on the sales staff had an almost zero positive effect in increasing sales under this model.

What the study didn’t explore is how the high performers and low performers did their job and earned their sales. It is reasonable to assume, although not discussed in the scope of the study, that the high performers had advanced skills and were already maximizing their potential, while the low performers on the sales staff simply had no way to know what to do to continue to earn the bonus.

The Buy-In Factor

The carrot and stick method briefly discussed above often makes sales professionals feel like they are just a line on a spreadsheet. If they are performing well they receive a bonus, or maybe a call from a manager to complement their job, but they are basically left on the their own.

On the other hand, if they are struggling to meet a quota or to expand sales, the employee may feel he or she is under a microscope. They get no recognition for what they are doing well, but they also get no concrete or constructive assistance in making positive changes. If they are constantly called out on the carpet about their performance, they are not likely to ask manager or a supervisor for assistance with challenges they are experiencing.

By providing sales skills training and/or sales coaching services, which are customized for each employee, the individual sees the company’s commitment to their success. This is the human connection or factor, the same connection every company wants their customers to have with their sales representative. When the employee feels valued and seen as a person who has the ability to improve and grow, he or she is more likely to strive to achieve within that organization. Consider working with a professional one-on-one sales coach from The Sales Coaching Institute in Chicago, IL. This is a great way to show the employee that you are committed to their success.

When every employee feels appreciated and recognized as a worthy and important part of the sales force, they will naturally perform better. They report greater levels of loyalty to the company and are more likely to make suggestions, try new techniques, and work to the standards and expectations of managers and supervisors.sales-coaching

It is a bit more than just boosting morale; it is bolstering the sales professional’s confidence in his or her ability to achieve the set standard. As people get better at their job they earn more, they connect with more new customers, and they grow and expand the company. Once the relationship with the sales coaching expert is developed, employees are more likely to ask for assistance or to express areas where they know they need more training and knowledge.

It is smart to have a good sales compensation plan that works for you by providing great incentives throughout critical quota points. It is equally important if not more important to connect with your sales force and provide them with the tools they need to succeed through sales coaching. Providing your sales team with both will help your entire sales force meet their numbers.

More information on specific types of sales compensation strategies can be found in this article.