Companies with clear, well-defined sales roles have more effective reward strategies than those that do not, according to research seen exclusively by HR magazine.
Mercer’s Sales Incentive Practices Survey Europe report surveyed more than 80 organisations in 20 European markets. It found that to maximise sales performance and drive effective sales behaviours, sales plans must be strategically aligned and well-communicated. One of the essential factors is the definition of sales team roles.
The survey found that 46% of organisations offer salespeople a bonus-driven reward programme, 45% offer an incentive-led one, and 9% a scheme based on commission.
While the majority of respondents were found not to segment their pay approach based on role, those in the top-performing 15% consistently reported higher levels of variable pay.
Mark McGowan, principal at Mercer and leader of the survey, said that getting this right is key. “One of the foundation blocks for effective reward design is clarity about roles,” he said. “In some situations you will find that hybrid roles make sense because of the business strategy, but being clear that that is an objective of how the sales function wants to operate is the first step in making such roles work.”
Rebecca Riley, global head of reward for Travelex, one of the firms surveyed for the research, agreed that for her the biggest difficulty in creating a sales reward strategy is including such hybrid roles. “In smaller locations or more geographically diverse locations we have hybrid sales roles,” she said. “It’s a real challenge explaining how incentives will work.”
When it came to reviewing the sales team, Mercer found that 41% of sales representatives have their targets reviewed and set annually and 52% quarterly.
Dow Scott, professor of human resources at the Institute of Human Resources and Employment Relations, Quinlan School of Business, stressed the importance of regularly reviewing targets. “When developing a plan of attack I’d suggest asking the team to submit a plan at least every quarter, outlining how each person is involved in the sales strategy,” he said. “Otherwise, since there are so many moving parts in such a team, you risk people becoming unaware of what others are doing.”
Riley agreed. “When you’re going through changes you must never assume your job is done,” she said. “Our biggest failing, for example, was when we launched a new strategy in April. After a few months people started asking us what was next, and we were really on the back foot because we thought we were sorted.”
Ownership of the sales incentive programme was found to vary by organisation between the sales function (32%), HR and reward (27%), and the business unit (21%). Riley said that even if HR owns the issue it needs input from other functions.
“You need to have sales involved, as they understand the people you are working for,” she said. “You also need to pull in finance for the commercial input. HR can bring in the project management side, as it’s not as simple as saying ‘I want to drive this person to sell this product’. Otherwise you risk just giving money to people without changing the business performance.”
“The overwhelming evidence suggests that pay really works as a motivator, and I’d suspect that in sales this is even more the case,” added Scott. “When you get your reward strategy right you’re sending a very clear positive message to your teams.”