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Should You Use Incentive Schemes

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Should You Use Incentive Schemes

In many fields of business a system of financial bonus schemes is offered as a way to encourage employees. Financial incentive schemes are specifically utilized in selling to encourage sales staff. Yet, it may be argued that these monetary incentives could lead to an erosion of sales management. In this management training article we go through the advantages and disadvantages to the Sales Manager of employing incentive schemes as a way to motivate their sales team.

Incentive or bonus packages were originally introduced as part of the sales person's remuneration package for good, understandable, management reasons. These included:

1. The salespeople’s' income has to be related to objective factors regarding success - that is more good results equals more income.

2. Failure or lack of passion are automatically punished by the sales person getting much less salary.

3. The sales team are aware of the consequences of the various courses of action and will choose for themselves, and so motivate themselves, to succeed in the one they've selected.

A side effect for the Sales Manager of using this method of motivating the team is the fact that the system works automatically, without any personal intervention and with out the need for the manager to take a position on the issue or to develop themselves into good leaders with management training. This really is exactly where criticism of such incentive schemes from a good management perspective begins. Any manager who permits their sales team to be led by automatism rather than through their actions isn't really managing. They are really simply administering their sales men and the budget. Any manager introducing a system of rewards in order to motivate their sales staff is, in fact, eroding his own authority. The drawbacks to incentive schemes can, therefore, be identified as:

1. The measurement for incentive systems is normally a figure, like turnover per time unit or cost per turnover unit. Achieving this threshold has very little to do with whether or not the sales man is helping to attain the corporate objectives. The indicators, for example, offer no indication of whether the sales man is promoting the company identity when they go to customer visits.

2. The premise - just rewarding those sales people who've exceeded a specific level - is demonstrative of the actual fact that the sales manager is additionally entertaining the likelihood that several of their sales people will fail. That is, the manager doubts their ability and their will to succeed and so meet the objectives they have set themselves.

3. Automatism which has been installed for reasons of wanting to reimburse sales people fairly for what they have accomplished can never replace personal appreciation of individual performance or intervention in cases of individual failure.

It is the sales manager's job to determine objectives with the sales people and to agree on the work that will be undertaken. The outcome of this must be that the sales person who succeeds in reaching the target that was set out for them should also receive personal praise from their manager, and the sales person who does not make the mark really should be personally reprimanded.


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