Incentives, Commissions & Bonuses: What Works?

You know it’s the end of the month, quarter or year when the phone rings and sales people have that slightly desperate tone in their voice. Some admit that you are the one person who stands between them and achieving their sales goals for the quarter. You are encouraged to make your decision before the end of the month or they won’t be eligible for that trip to Hawaii. Some are not that forthcoming, but sales incentives can be tricky. This issue reached the forefront of the media when Wells Fargo fired 5,300 employees for opening fake accounts to meet sales quotas.

Please be assured, I’m not at all opposed to incentives. Sales is a very difficult job and those who do well should be properly rewarded. This is part of our cultural DNA. We use tipping to encourage/reward better service, we have sales contests, we promise our kids a treat if they behave in the store and we let ourselves have a cookie if we went to the gym in the morning. It’s all well and good when it works, but oh so bad if it doesn’t.

The process works best when it’s carefully and fairly administered to honest and motivated individuals. For employees who love the challenge of an i n c e n t i v e system, it can keep them excited and engaged for years. With time as the only enemy, this person will shine as long as there are minimal constraints on their potential success and earnings. You may see other team members who seem uninspired whatever carrot you hang in front of them, satisfied to make just enough to live comfortably. Some will never adapt to an incentive system; therefore, probably having a short career in sales.

The process works poorly when incentives are designed without research (i.e., considering loopholes, cultural issues, proper rules, etc.), applied haphazardly, are not closely monitored and ultimately not supported by the company’s own standards of performance (ethical values).

At the end of the day, be an educated consumer and an educated employee. You should know how the people you do business with make their money.

Mary Louise VanNatta, CAE is CEO of VanNatta Public Relations, a PR and strategic communications company in Salem, Oregon. PRSalem.com