Perplexed about Profitability? Boost your Bonus Plan

Apr 20, 2016
2 min read

Today's guest post was written by Tom Castley,Vice President, Xactly EMEA. Last week the Cranfield School of Management released a survey on European businesses, which included some pretty worrying findings. Half of Britain’s top bosses reported that they didn’t know how to raise their profit margins. Equally concerning was the finding that one-third of UK executive directors said they believed their sales teams made decisions on prices based on “gut feel” rather than “hard facts and quantifiable business data.” Given that business leaders apparently feel a lack of both visibility and influence over their sales teams’ actions, it’s perhaps unsurprising that they can’t see their way to increase profitability. But there is one tool to address this that many UK businesses are failing to use – and that is robust incentive schemes.

Information, not instinct

For businesses to succeed, leaders must give sales teams clear instructions on who to sell to – rather than leaving reps to rely on “gut feel.” This can be achieved by implementing robust, and more importantly, visible bonus schemes, to give salespeople real time objectives from the business. Robust incentive plans attach monetary value to different targets; commissions can be varied depending on prospects’ size, sector, and strategic importance, and sales people can be directed to prioritise either generating more leads or closing those deals. Bonus schemes can translate overarching business strategies into action on the ground, in a very clear and precise way. This is a crucial means of making boardroom tactics a reality to improve productivity.

Performance data

As well as providing sales teams with information, smart bonus platforms provide leaders with data about their teams’ performances. This enables tactical management decisions based on an understanding of where the teams’ strengths lie. Businesses can also identify what 'good' looks like in their sales reps, enabling them to hire top performers in the future. Without data, management is done by gut – in the same way that Sunday League football managers use their instinct when coaching, while Premier League managers can rely on reams of data, from Opta statistics to TV replays and more. Data provides managers with an evidence-based view of their team and supports them in making tactical training decisions that get the most out of each employee – and ultimately boosts productivity.

Money to motivate

Bonus schemes also increase profitability by improving motivation. Our research at Xactly has shown that a quarter of UK employees state that a financial bonus is their main motivator. Commission helps to engage employees and connect them more closely to the success of the business. Real time information on bonuses also gives staff a clear view of the money they stand to gain on each win. Moreover, using smart commission platforms, businesses can ensure that their bonus plan won’t cut into their profit margin. Xactly’s platform provides an accurate forecast of the total commission budget for the business, allowing executives to avoid the dreaded overspend.

So, to boost business profitability, use the power of commission with these three simple steps:

  1. Implement a robust bonus scheme that translates business strategy into action on the ground for your sales team
  2. Use data from your smart bonus platform to make savvy management decisions and optimise your teams’ performance
  3. Improve engagement to boost profitability – but forecast your commission spend accurately to avoid nasty surprises
  • Incentive Compensation
  • Sales Planning
Karrie Lucero
Karrie Lucero
Content Marketing Manager

Karrie Lucero is a Content Marketing Manager at Xactly. She earned marketing and journalism degrees from New Mexico State University and has experience in SEO, social media and inbound marketing.