Best Practice - Designing Plans Which Are Fair

Best Practice - Designing Plans Which Are Fair

When designing a sales incentive plan, your goals typically include:
  • Limiting total spend to a reasonable amount
  • Maximizing the effectiveness of your spend
  • Ensuring that top performers feel recognized
  • Ensuring that participants are challenged to reach for the next level (which should feel attainable)
  • Ensuring that under-performers don't consume too much of your sales incentive budget
  • Being able to clearly communicate with participants regarding their potential total compensation

We recommend the following:
  • Define 4 attainment levels
    • L1 is a baseline attainment level with a difficulty of "Trivial"
      • No monetary rewards should be assigned at this level (you can learn more about why defining a baseline attainment level is useful here)
    • L2 is an attainment level with a difficulty of "Easy"
      • The threshold should be set so that the lowest 25% of participants reach this level
    • L3 is an attainment level with a difficulty of "Standard"
      • The threshold should be set so that another 50% of participants reach this level
    • L4 is an attainment level with a difficulty of "Difficult"
      • The threshold should be set so that the top 25% of participants reach this level
  • Submit calculations (consider using simulation)
  • Run reports to understand
  • Configure your plan to cap total spend
    • This protects your plan from overspend scenarios
      • You could let participants know that rewards will be re-adjusted if the budget is exceeded

Keep in mind that you may be able to increase the effectiveness of your plan using the following:
  • Consider using profit instead of revenue to avoid overpaying for low-margin sales transactions
  • Consider using scoring to boost certain sales behaviors (ex: promote the sales of new products)
  • Consider using innovative approaches such as ranking or % increases instead of traditional quotas
  • Consider creating personalized plans (ex: plans specifically designed for specific job titles or individuals)
  • Consider non-monetary rewards (ex: announcements, badges, prizes) as a way to motivate and recognize participants

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