How To Motivate Higher Returns
By Brian Summerfield
Before any incentive program is rolled out, sales managers and directors should, as the old business aphorism goes, "start with the end in mind." One of the most glaring problems with the Glengarry Glen Ross scenario is that there aren't any real objectives behind it, with the possible exception of cutting staff. The sales targets aren't specified; the top salesperson simply gets a car, no matter how much or little his performance actually contributes to the company's bottom line. Clearly, sales incentives don't—indeed, can't—work this way.
"More often than not, what you see in the presentation and development of sales contests are the goals of the corporation and how you can help us get there," Ryan said. "What an organization will do when they're putting together a sales incentive program is think of closing those gaps as part of their financial rationale. In many cases, once they've built the business case for the incentive program, they'll apply multiple measures to getting that done. They'll apply some type of revenue or tangible-gains component—something they can measure, that's part of their normal process and that's designed to prove that those gaps are being closed."
In terms of goal-setting, objectives for sales incentive programs need to be simple, clear and realistic, Davis said.
"What often happens is we set these goals, and the salespeople say they're all over it, but they don't necessarily know how to accomplish those goals. Any salesperson can quickly lose initiative if they don't feel like they can accomplish the objective that has been laid out. I think it's like a contract where the director says, 'These are the goals we want to achieve,' they create some buy-in, and then they set up a process by which people can realistically achieve these goals. They might say something like, 'If you talk to this many people, you won't get sales from everyone, but you ought to get this percentage. So here's what you should be trying to do to reach that objective.'"
Once goals for these programs are established, they need to be tracked in an effective way. A common measurement, obviously, is return on investment (ROI). But in measuring the ROI of sales incentive initiatives, it's important to determine all the sales that resulted from the program, not just those that closed during the official time frame of the contest.
"At the end of the day, you look to these contests to deliver positive economic returns. Everyone asks, 'What's the ROI of my investment?' The ROI only happens because the sales generated are coming out of the effort that people put in during the contest. If the contest closes on a certain date, and you only measure the sales that happened during the contest, I think you're missing the point. When you reach the official conclusion of the contest, you find that the ROI is barely positive. But if you go out another one or two weeks after the contest ended, lo and behold, you have a huge ROI. There is an official horizon, and there's an expanded horizon."
In addition to financial metrics, sales managers and directors should consider how these programs encourage positive behaviors in their sales staff.
"I think you have to have reliable metrics around these programs," Davis said. "It should be performance-based: Part of it obviously should be based on sales volume and margins. The danger comes when all your metrics are focused on just sales results. A lot of sales people might work in territories or in circumstances in which market conditions do all the work for them, particularly in a resale environment. The metrics should be partly about results, but a good program can base incentives on ideal behaviors. It should reinforce activities you want your sales force to engage in."
If sales leaders can incorporate these principles in their incentive programs, they will bring their teams closer to that ideal espoused (but not practiced) in Glengarry Glen Ross: Always be closing.