Historically, sales performance incentives have been focused on individual recognition. Plans such as individual sales quotas are designed to reward, recognize, and help retain high achievers, as well as motivate the average and below average performers to go above and beyond. They also appeal to the nature of the “competitive salesperson” archetype, and are for the most part simple and straightforward to implement from an administrative perspective. The overall benefits of sales incentive plans can be industry, organization, or culture dependent. However, assuming for your organization that individual sales incentives are indeed effective, can supplementing individual incentives with team based rewards reduce the negative consequences from individual awards, while promoting sales behaviours that improve the organization as a whole?
Sheila Mccarthy and Shalin Sharma of Sibson Consulting do an excellent job of outlining the pros and cons of rewarding individual vs. team performance in the article, Are Team-Based Incentive Measures Right for Your Sales Organization? Overall the major cons associated with rewarding individual behaviours are the potential to lead to an overly competitive environment, where individual agendas are valued more than what may be best for the organization as a whole. There can also be conflict where determining who should actually get credit from a sale with multiple contributors is concerned. On the other hand, focus on the team can cause specific high achievers to feel diminished recognition and can allow lower performers to be propped up by the team. The material impact of these negative consequences can vary depending on your organization’s current culture, personnel, the method/type of sales, and a host of other factors but they can be very detrimental to collaboration, team morale, and ultimately company performance.
Occurring in parallel to all of this is the move toward cross function collaboration in the workplace which is being enabled through advancing technology. Transitions towards corporate performance management (CPM) software, ERP systems, and leveraging cloud technologies have made workplace collaboration increasingly feasible. In their article Why Individuals No Longer Rule on Sales Teams the Harvard Business Review suggests that this shift is also occurring in sales teams. From the article, “Because sales reps are more directly networked with their colleagues through technology, they more easily aggregate skills, knowledge, and experience to uncover new opportunities and to debate tactics for generating business.” Fostering and promoting such behaviour can go hand in hand with the addition of team based rewards to an individually focussed sales incentive plan.
Even in a less connected world, effective team based rewards can have the positive effect of promoting collaboration between salespeople in the form of sharing tips, advice, knowledge and expertise. After all if the reward structure is dependent on the team’s performance as a whole, theoretically salespeople will not want to let the team down, while the “stars” have an incentive to work with and motivate those who may be lagging in a particular time period. The reward structure combined with increased access to collaborative technology allows for a mixed team and individual based sales incentive plan that feels achievable and fair to salespeople, rewarding the individual while still aiming to focus on the success of the overall sales force as a whole.
It’s important to note that as an incentive plan becomes more complex the administration of such a plan can hit a level of diminishing returns where either the implementation becomes too cumbersome for management, or the confusion or lack of clarity reduces employee engagement. However just as the technology to collaborate in the workplace has been improving rapidly, so too have ICM and SPM solutions. With sales performance management software, complex logic and calculations can be integrated into a solution with high visibility for managers and salespeople, allowing what at first seem like complicated incentive plans to be managed quite easily.
The effectiveness of sales incentive plans will forever be dependent on many different factors and in some cases will benefit more from recognizing individual success over team success. However the mitigation of some of the negative effects that an excessive focus on individual performance can produce, as well as increased collaboration and overall employee satisfaction can be fostered through a more comprehensive sales incentive plan rewarding not only individual contributions but also providing team based rewards. And with the emergence of sophisticated SPM software, the implementation and adoption of such plans has never been more achievable.