Is It Time to Rethink B2B Sales Incentive Plans?

Is It Time to Rethink B2B Sales Incentive Plans?

The overwhelming majority of companies use individual, revenue-based incentive plans as part of their compensation package for front-line sales staff. For as long as there have been salespeople, commission served as the perfect motivational lever which kept them productive and happy—it could even make them quite rich if they got good enough at it. But now it’s time to re-evaluate this strategy given the recent changes in business-to-business buying behavior.

Strategic buyers are no longer dependent on salespeople for information on product and service offerings. In the information age, business leaders can consult review sites, online forums, social media, and professional networks to discover solutions for their needs. In fact, at CEB (now Gartner), our Sales and Marketing practice found that the typical B2B buyer is 57 percent of the way through their decision-making process before engaging with a supplier. The cold call isn’t dead, but it is no longer the most prudent way to introduce your product to potential customers.

As such, it has become harder to measure the value a salesperson has provided after a purchase is made. Previously, companies would arm their field teams with standard marketing materials and wait for the money to come in. Sales reps would cultivate leads, provide potential customers with all of the relevant information, and convert some of those opportunities into deals. The salesperson’s contribution was very clear: They were revenue generators. Today, now that customers wait until they know exactly what they want and how much they want to pay for it before reaching out to salespeople, B2B providers are getting their name out through some combination of PR, content marketing, social media, white papers, and the like. The best companies are doing it in a way that draws prospective customers into the funnel, recognizing the need for more institutional support in the sales and lead generation process.

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Are Individual Commissions Just Not Working?

Are Individual Commissions Just Not Working?

To Frank Kalman, managing editor of Talent Economy, Wells Fargo’s fake-accounts scandal is an example of how commission-based compensation often fails to drive overall performance as an incentive structure. He compares Wells Fargo’s situation to a similar problem in professional sports:

In Wells Fargo’s case, bankers wanted to meet individual commissions targets based not on organizationwide performance but on amount of new accounts opened. After a while, a single employee figures out a way to game the system, opens a few fake accounts to meet a target, tells a colleague and the culture pervades. Soon enough, the goal becomes not helping Wells Fargo drive new business by creating fake bank accounts, but filling their own real bank accounts with commissions driven by bad behavior. The result: Wells Fargo owes $185 million in fines and has to fire 5,300 employees (not to mention the public scrutiny the bank will have to endure for years to come).

Professional sports are another example of performance-based pay run amiss — although the practice there usually doesn’t lead to criminal accusation. Most professional athletes are compensated generously in their base salaries, but many earn a good deal through performance-based bonuses. A baseball player, for example, might earn a certain bonus if they reach a threshold for number of innings pitched over the course of a season. Another might be rewarded extra pay if they hit a certain number of home runs.

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