Can we do away with sales bonus?

If you have been part of an HR or any other team who had the (un) fortunate chance of designing a sales incentive plan then you might may be able to relate to at least one of following,

 • The time and resources that goes into designing or redesigning it. • The disengagement that it creates when the purpose was the exact opposite

 • The sales people always miraculously and ethically finding a way to achieve the numbers by some very logical way of tweaking and turning the numbers.

 • Creates a culture where people create unhealthy competition and find it difficult to collaborate. This raises the question whether we really need have a sales incentive plan.

For this let us have a look at various sales incentive plans. Broadly speaking sales incentives may be,

Commission based- In this case you are paid a flat amount of money for the sales YOU make. It has nothing to do with the company's financial. simple isn't it!!!.

Financials based- This is where the designers of the programme spend a lot of time and effort( and money too) where a complex set of mathematical formula's makes sure that no one really understands what they would get at the end of the year.

Perks- Normally comes in the forms of gifts/memberships etc.

 Daniel Pink highlights in his book "Drive" how most of the rewards systems are designed by going against the premises of motivation. Infact it sometimes seem so obvious that we design a sales incentive plan because of the following reasons,

 • Its been a culture that has been followed and we do not want to break it • why fix it when its not broken- Really?

• we dont have a better idea than this.

 A few options to create an effective sales incentive plan  are,

Remove individual bonus schemes 

I know that this might sound like a utopian thought but there are examples of companies ( especially start up firms or SME's) who have done this and have found this to be really successful. Red Gate software's owner Neil Davidson is one of them who believes in this and has seen that removing the bonus system has helped create more collaborative working environment and an increase in sales revenues. This means you would have to increase your base comp and end up paying a onetime bonus at the end of the year based on company performance. so what? This would not only make it easy for your sales folks to forget the daily mental fatigue of calculating their bonus but also help them focus on creating better and realistic goals and achieving them.

 I know that my first option may not be easily digestible. So here is another one which honestly for me is not then preferred one though,

Tie it to your business context

Every business has a cycle and we are used to see the normal wave lines of business, however it may be a good idea to use the good old BCG matrix to see where your company and its products fall into

This would help you create a customised plans based on your company situation and the products rather than creating a vanilla programme that goes across all your product lines and businesses. The caveat here is that you might still be spending a lot of time creating a plan which will foster rivalries within the company and make it difficult for you to move your talent within the different product lines.