Designing Incentive Schemes
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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”
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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
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Design incentive schemes using theories of motivation
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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
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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
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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