Role-based incentive plans are used to motivate and reward those who have a direct effect on company financial results, in both sales and non-sales roles. Keep these key principles in mind when designing a role-based plan:
- Pick measures that are linked directly to income generation for the company (e.g., revenue, units sold, margin) rather than activity level (e.g., number of calls).
- Pick as few measures as possible to cover the primary accountabilities of the role. One or two would be a good number for a newly-instituted plan. Three might be OK. More than three would have to be well-justified as it dilutes both the message communicated by the incentive plan and the payout value of accomplishing any of them.
- Design the plans with line leadership’s involvement so that they introduce them with a message like, “Here are our new incentive plans. We are thrilled to share them with you because we believe they will significantly increase both your income and that of the company. Let me show you how . . .”
- Provide great materials to communicate the plans — since the reason you’re doing it is to motivate and excite the eligible employees.
- As soon as you have an idea of what the final design may be, start planning for accurate and timely administration of the plans and great reporting. You risk losing much of the motivational value if employees don’t see a frequent and easily understood connection between their results and their earnings.
Donya Rose, CSCP, is Managing Principal of The Cygnal Group. She is a recognized expert in sales compensation plan design, regularly speaking at conferences and writing published articles. She serves clients from F500 to growth-stage businesses, and advises WorldatWork on sales compensation hot topics and best practices.