The Case for Team-Based Sales Incentives
Historically, sales performance incentives have been focused on individual recognition. Intuitively, this makes sense as this approach reinforces the notion that individuals should chase after goals. Plans like 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. These plans are meant to lean into the “competitive salesperson” archetype and are for the most part simple and straightforward to implement from an administrative perspective.
This approach works. But only offering individual sales incentives is narrow-minded and can be supplemented with team-based rewards. The concern is that group incentives can undercut individual ones, but you can strike an effective balance.
Pros & Cons: What the Research Says
Sheila Mccarthy and Shalin Sharma of Sibson Consulting outline 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 behaviors 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 when determining who should actually get credit from a sale with multiple contributors.
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.
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Changing Technology, Changing Collaboration
Occurring in parallel is a move toward cross-functional collaboration in the workplace as technologies foster more teamwork. Transitions towards corporate performance management (CPM) software, ERP systems, and leveraging cloud technologies have made workplace collaboration increasingly integrated into the everyday workflow.
Harvard Business Review covered this shift in their article Why Individuals No Longer Rule on Sales Teams, discussing the impact on sales teams.
“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 behavior can go hand in hand with the addition of team-based rewards to an individually focused sales incentive plan.
Sharing Is Winning
Even in a less connected world, effective team-based rewards promotes 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, in most cases, salespeople will not want to let each other down. The top performers will also have an incentive to work with and motivate those who may be lagging.
This 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.
Curbing the Complexity of Collaborative Incentives
It’s important to note that as an incentive plan becomes more complex executing can become exponentially difficult. Either the implementation becomes too cumbersome for management, too confusing, or a lack of clarity reduces employee engagement. Sales performance management solutions are designed to help streamline complex logic and calculations while providing high visibility for managers and salespeople.
The effectiveness of sales incentive plans is entirely dependent on many different factors and in some cases will benefit more from recognizing individual success over team success. However, increased collaboration and overall employee satisfaction can be fostered through a sales incentive plan that rewards not only individual contributions but also provides team-based compensation. Afterall, your reps are all on the same team.
Designing Sales Compensation Plans
With careful consideration and strategic design, you can use incentive compensation to inspire your teams and empower them to perform above and beyond the competition.