What’s in and out in the world of incentive compensation

In the 1992 film adaptation of David Mamet’s play Glengarry Glen Ross, Alec Baldwin’s character offers the best salesperson not simply the joy of knowing they came top of their class, but a Cadillac Eldorado. Needless to say it motivated the group (probably best to leave it at that), and also established the sales mantra—Always Be Closing (ABC).

These days, incentive compensation is becoming an increasingly popular way to boost performance beyond the individual contributor. Revenue Brew spoke with two firms that specialize in compensation strategies and one sales leader on what’s working when motivating his team.

Coffee is for closers

Josh Isner, president at public safety technology company Axon, said one incentive rule his company emphasizes is not capping commissions. (Many organizations seem to view commission capping as demotivating for employees.)

Commission structures vary of course, and paying up front for multiyear deals is an established practice in some sectors. Axon sellers are paid up front on five-year deals if they can cultivate and bring the relationship to term (if not, much of it is clawed back). Once that up-front commission is established on a new account, incentives are built to motivate sellers to get their accounts to buy newer products. For Isner, this investment builds trust in the sellers.

“We want to have long-term relationships with our customers,” Isner said. “It is a very small market, so being able to offer multiple products into the market and upselling at different times is an important function.”

The review process involves asking Axon’s top performers for annual feedback on their compensation plans.

“We want their feedback, but we also want their buy-in. So when they go to all their colleagues who are calling them and saying, ‘What do you think about the plan?’ they’re saying, ‘I was in the room when we made this plan,’” Isner said.

Tracking trends

A recent CaptivateIQ report found that less than 30% of leaders said their compensation strategy is prepared for economic shifts and market volatility. CaptivateIQ co-founder and co-CEO Mark Schopmeyer said this lack of confidence is a new phenomenon related to an unpredictable macro economy.

“Companies are having to respond even faster...Any planning process feels almost archaic if it’s probably more than two quarters,” Schopmeyer said.

Schopmeyer suggests compensation plans are part of a much broader strategy in creating an environment of success and motivation.

“I’ve never seen a comp plan in itself change the performance of the team,” Schopmeyer said. “If I were a newer CRO coming in, what’s important is: What’s the culture of the team?...Do I have to change how I think about quotas to make it easier to win?”

Nonmonetary incentives

Mike May, executive chair and former president of incentives and events agency Brightspot, discussed the importance of nonmonetary incentives in boosting sales team morale.

First, it creates what he calls “daydream value.” “If I put something out there, like when I said somebody could earn a President’s Club trip to Italy, that may spark a daydream in you,” he said.

Secondly, he said nonmonetary incentives create a “guilt-free splurge” for sellers who, if given cash, might feel pressured to spend it on more practical things, like a credit card bill or a child’s college fund. “You’re able to splurge and justify the splurge without feeling like you’re failing to make some other more responsible decision,” May said.

Finally, May identified “trophy value,” or the social capital that comes with being able to show off a car that was won, or maybe send an Instagram post from a prize trip to the Amalfi Coast. May said that for the highest performers this one is especially important, as they are often looking for atypical success metrics.

“If you want to brag against your colleagues that you won, you can, but if you also want to notch something in your personal trophy case…it reaches that type of internal competitor,” May told Revenue Brew.