A reward is a prize given for sales achievement. A sales incentive is something that drives performance towards achievement. In a sales department, we wrestle with the strategy of offering incentives on a team or individual basis. In previous articles, we examined the positive and negatives surrounding sales strategies that recognize the sales team win; here, we want to weigh the pros and cons of individual incentive plans.
Advantage to Individual Incentive plans
- Rain Makers: Your top performers thrive on attention. They recognize an individual incentive, and they will chase it. They will reach and exceed when they can.
- Inspiration: When the sales leaders excel, they inspire achievement by mid-performers. Once the under-achievers see what the sales leaders win, they are likely to imitate their behaviors.
- Performance-based: When you reward individuals, you reinforce specific strengths. It lets you honor and cultivate those strengths and sustain their development.
- Competition: Creating a competitive situation engages top performers. They will instinctively pursue the competition as well as the reward. The environment structures the performance toward outstanding results with sales people pressing to exceed their personal best.
- Clarity: You can more easily structure clear individual incentive plans than team plans. Tracking performance and determining outcomes will prove easier.
Disadvantages of Individual Incentive plans
- Autonomy: Individual sales incentive rewards build egos, and egos are always a risk to loyalty. When individuals build up image and reputation, they also become a commodity attractive to your competitors.
- Diminishing Returns: The emotional satisfaction that comes with repeated rewards has a way of declining as a function of the repetition. It becomes taken-for-granted, and this presses sales management to increase the reward.
- Alignment: Rewarding individuals runs the risk of making money the goal. It creates an environment where prize money is the performance purpose – as opposed to sharing corporate goals.
- Costly: Rewarding individual performance endangers the sales department’s social wholeness. The same positive motives that drive individual performance can conflict with group cohesion and values.
Our continuing conversation about the respective values of rewarding team or individual sales performance has reviewed the pros and cons of both. Depending on a company’s size and product line, it may prefer one strategy or another fully.
But, where a sales department has any size, your business will likely integrate team and individual incentive strategies. With that in mind, we invite you to join the discussion with examples of successful plans that have worked for you. Are you using individual incentive plans in your sales department?