Designing Incentive Schemes

© Commercial Effectiveness Consultancy

Common concerns raised with sales force incentive schemes

“It’s always the same people who win the

awards”

“The scheme looks great but I will never achieve my targets”

“It’s all down to luck if you get

any bonus”

“I took home great bonus last year and nothing this year!”

“I don’t understand the

incentive scheme”

© Commercial Effectiveness Consultancy 2

Design a scheme which is easy to understand, transparent and equitable4

Align metrics to the commercial strategy3

Motivate individuals to over-perform2

Reward and recognise the highest performers1

Common guiding principles of incentive schemes

© Commercial Effectiveness Consultancy 3

Design incentive schemes using theories of motivation

4© Commercial Effectiveness Consultancy

EXPECTANCY

Level of belief that increased effort will

lead to increased performance

INSTRUMENTALITY

Level of belief that a reward will be received

if the performance expectation is met

VALENCE

Level of belief that the value of the reward is

worth achievingMOTIVATION

Victor Vroom – Expectancy Theory:

Edwin Locke – Goal Theory:“Setting specific goals drives higher levels of performance than setting general goals”

“Goals that are hard to achieve are linearly and positively connected to performance”

John Adams – Equity Theory:“Employees seek to maintain equity between the inputs that they bring to a job and the outcomes that they receive from it against the perceived inputs and outcomes of others”

Set challenging but achievable targets

© Commercial Effectiveness Consultancy 5

Targets are not achievable - Too little

bonus paid out

EFFORT EFFORT SALES FORCE SALES FORCE

Targets are not challenging - Too much

bonus paid out

Targets are fair - Payouts in line

with budget

Process of developing a new incentive scheme using

CE Consultancy

6© Commercial Effectiveness Consultancy

1. Agree Guiding Principles

2. Analysis of current schemes

3. Design new schemes

4. Implement new schemes

5. Ongoing management of schemes*

• 1:1 feedback sessions• Payout analysis

• Understand objectives• Setting up project team

• Design metrics and payout mechanisms• Scenario planning analysis

• Communication materials• Design monitoring tools

• Update monitoring tools• Ongoing communications• Setting sales targets• Analysis of scheme effectiveness

* If required