Tag Archives: Training

Is Cash Always King? Key Questions When Developing Non-Cash Reward Programs

See the article on the WorldAtWork site.

Is Cash Always King? Key Questions When Developing Non-Cash Reward Programs

By Donya Rose, The Cygnal Group

“What part of ‘the deal’ with your company really drives your focus and keeps you working hard?” Do you know how your sales people would answer this question? If your sales compensation plan is working, it is likely to be at the top of the list, but you might also find that sales people value:

  • Recognition programs
  • Award trips
  • Leadership and sales skill-development opportunities
  • Promotion potential
  • Points-based/merchandise rewards.

Whether your focus is purely on designing the cash-based sales compensation plan or broader motivation and rewards, it is important to know what your sales people value and what your reward systems drive them to do.

When designing a reward program, consider the following questions:

Are we primarily trying to support our core sales goals with added motivation, or are we focusing on different objectives not in the core sales compensation measures?

Many recognition programs reward people for achieving or surpassing their annual goal. Most sales compensation plans do the same, providing handsome rewards for those who exceed productivity expectations. An alternative approach would be to focus a non-cash reward program on a new product launch, regional profitability, growth over the prior year or large account penetration while the core sales compensation plan and cash rewards maintain the focus on top-line quota attainment.

How many of our sales people do we expect to participate in the non-cash reward?

Posh trips and top recognition make the best stories, but they are often so costly on a per-winner basis that the number of participants must be managed carefully.  A leading media and marketing services company selects up to 10% of sales people as top achievers each year, along with select performers from other functional areas. This enables them to put on a memorable event for those who have performed exceptionally during the year. Similarly, a global software company has just finished documenting their new recognition plan in which they expect 5% of the sales staff to participate.

Companies that intend to be more inclusive, with a higher percentage of sales people “winning,” may offer a more modest trip, a points-based reward or a stronger emphasis on recognition than a costly event or prize. However, the broader reach of such programs can affect more people and do more to improve results. On the other hand, in many salesforces more than half the sales come from the top 20%; in those companies an approach that strongly motivates the top 20% can significantly enhance overall results.

Is our trip mostly a reward or is it mostly a development event?

In the case of reward trips, companies differ significantly in how they expect winners to spend their time during the trip. Some companies choose to offer a trip that is primarily a reward trip, with a few meetings included to recognize the winners and share the company vision. For others, the trip is about leadership development, building relationships across geographic regions and getting to know third-party partners and their offerings better. For these companies, the trip is a working meeting that provides an important opportunity for top sales people to get to know top company leadership, have their voices heard and be noticed in anticipation of future leadership opportunities.

Will anyone outside of the salesforce be eligible to participate in non-cash rewards?

For reward programs with a strong recognition component, functional areas that contribute to the success of the sales team are often included as well. In some cases, the reward program is company-wide and sales people who demonstrate top performance receive recognition alongside others in other functional areas. In other companies, the reward program may be sales-focused with awards to non-sales employees based on nomination from the sales team for excellent support of the sales effort.

Donya Rose is Managing Principal with The Cygnal Group, Inc. Contact her at donya.rose@cygnalgroup.com.

How to handle compensating Territory Sales Managers who have additional responsibility to coach and train new hires or under-performers.

So just to summarize your previous company history, you have given base salary increases to recognize the coaching responsibility in the past, however, going forward, the duty will be held on a 1-year rotational assignment rather than an on-going responsibility, so you are seeking an appropriate alternative.

First of all, you are wise to avoid adding permanently to the base salary in recognition of a transient responsibility. My suggestion is to provide a separate incentive compensation opportunity based on the sales results of the person being coached. It should probably be about 20% of their total incentive opportunity if you want them to maintain focus on their primary individual selling job. And it should be structured simply. For example, earn 50% of the target incentive if the “coachee” is at least 80% of quota, 75% at 90%, 100% at 100%, 125% at 110%, 150% at 120% or better. I’m not at all sure the performance range here (80% to 120%) is right for your business – so you should adjust those depending on the aggressiveness of your quotas and the predictability of your business.

The next question is whether or not the coaching incentive opportunity should be in addition to their regular comp plan or carved out of it. If they receive a reduced personal quota in recognition of the time they will need to spend on this, there is an argument for a carve-out (reducing their regular comp plan incentive at target to offset the coaching incentive). But more likely they are top performers with typical/healthy quotas, and this is an added responsibility. If this is the case, then the incentive opportunity should be in addition to the regular variable pay plan.