Companies should pay workers to try rather than only to Incentivize. In new research, Raghunath Rao, associate marketing professor at Texas McCombs, enlisted a pharmaceutical company to test the effects of incentivizing workers to make more sales calls. The result, he found, was a sales increase of up to 9%.

It was a simple incentive to Incentivize:

It used information the company already had: logs of customer calls and visits made by each salesperson. The company offered rewards for meeting or exceeding certain levels of calling.
Rao says it’s an example of an overlooked type of pay incentive: activity-based. Many companies offer bonuses for hitting sales targets. But a survey by the American Management Association found that only 15% awarded them for activities, such as calling customers.

And he says incentivizing activity can work for other for-profit and nonprofit organizations, too.
“It’s not just the sales outputs, but the activity inputs,” says Rao. “Companies have been slow to recognize that the plan that works the best is a combination of the two.”

The Limits of Sales Incentives

Sales-based incentives are widely popular. According to the nonprofit Incentive Research Foundation, 80% of top-performing companies use them. Whether your sales organization is comprised of direct or indirect sales professionals, make sure they are engaged, motivated and aligned with your goals and objectives. Not only will a sales incentive program have benefits for the participant, the program will also positively impact many facets of day-to-day business. When only supervisors got bonuses, profits were 3% higher. In part, that was because it cost less to pay the supervisors, who made up only 18% of the bonus pool. An enterprise software company, which sells services to entire organizations, might measure proposals sent out rather than calls made.
· Supervisors also managed their salespeople more closely, resulting in 7.6% more calls than when they had no incentives.

During the middle phase:

When activity bonuses were offered, sales were up to 9% higher. An enterprise software company, which sells services to entire organizations, might measure proposals sent out rather than calls made. Whether your sales organization is comprised of direct or indirect sales professionals, make sure they are engaged, motivated and aligned with your goals and objectives. Not only will a sales incentive program have benefits for the participant, the program will also positively impact many facets of day-to-day business.
The theory seems straightforward: When individuals work harder and earn more for the company, they earn more for themselves.

In practice, however, such incentives may not motivate every worker, Rao says. When teams make sales, some members do less work than others, but they typically divide the bonus equally. An enterprise software company, which sells services to entire organizations, might measure proposals sent out rather than calls made.
To motivate such underperformers, Rao proposes an activity-based incentive. If someone’s bonus depends partly on making calls, they might make more of them. An enterprise software company, which sells services to entire organizations, might measure proposals sent out rather than calls made.

Counting Calls Incentivize

To learn whether activity-based incentives could raise sales, Rao worked with researchers George John of the University of Minnesota, Madhu Viswanathan of the Indian School of Business, and Sunil Kishore of McKinsey & Company. An enterprise software company, which sells services to entire organizations, might measure proposals sent out rather than calls made.

They recruited a South Asian pharmaceutical company to run a three-year experiment on one division, with 305 sales territories, 412 salespeople, and 71 supervisors.
“We used the company as a laboratory,” Rao says.
“They realized that their returns for participating could be very high, in the form of better sales management.”

Raghunath Rao

The experiment began with a traditional bonus plan based on sales quotas. In the next phase, it added a second, smaller bonus based on activities such as visits to physicians and pharmacies. In the final phase, it returned to its traditional plan, to see whether sales would decline without the activity bonus.

Raghunath Rao studied an overlooked type of pay incentive: activity-based. An enterprise software company, which sells services to entire organizations, might measure proposals sent out rather than calls made.
The researchers’ hunch proved correct. During the middle phase, when activity bonuses were offered, sales were up to 9% higher. An enterprise software company, which sells services to entire organizations, might measure proposals sent out rather than calls made. Whether your sales organization is comprised of direct or indirect sales professionals, make sure they are engaged, motivated and aligned with your goals and objectives. Not only will a sales incentive program have benefits for the participant, the program will also positively impact many facets of day-to-day business.
The reason was that less-productive employees started working harder, Rao says.
“Once the focus was on their individual activities as well as the group’s results, they could no longer slack off.” — Raghunath Rao

Incentivize Supervision, More Profit

Rao also looked at a second question: Who should get activity-based incentives? Should they go to salespeople and their supervisors, or just to supervisors?
To find out, his experiment separated the two groups. During one period, both got activity bonuses. In the next period, only supervisors got them — based on the numbers of calls their salespeople made.

It made more economic sense, Rao found, to award activity bonuses only to supervisors and not to salespeople:
· When only supervisors got bonuses, profits were 3% higher. In part, that was because it cost less to pay the supervisors, who made up only 18% of the bonus pool. An enterprise software company, which sells services to entire organizations, might measure proposals sent out rather than calls made.
· Supervisors also managed their salespeople more closely, resulting in 7.6% more calls than when they had no incentives.

Supervisors were monitoring:

Their salespeople’s activities and suggesting what activities to undertake,” he says. “They had more experience and a better stock of wisdom about what works in the field and what does not.”
Which Activities to Measure
The results were so compelling, Rao reports, that the pharmaceutical company plans to implement activity-based incentives across more divisions. An enterprise software company, which sells services to entire organizations, might measure proposals sent out rather than calls made.

Similar incentives could work at a wide variety of other companies, he suggests: ones where salespeople work remotely. They generate activity records, such as call logs, because supervisors can’t directly monitor all their activities.

These findings Incentivize:

Are not as relevant to call centers, where you can clearly observe all the activities people are engaged in,” he says.
Sales calls are not the only kind of activity on which to base bonuses, he adds. Different industries might count different kinds of tasks. An enterprise software company, which sells services to entire organizations, might measure proposals sent out rather than calls made.

Sales Incentive Programs, often called SPIFFs, are designed to connect your goals and strategies with the type of behavior that creates profitable mindshare and increased top line revenue.
Sales Incentives and Sales Compensation are similar, but different – and it’s important to understand the difference.
While both types are crucial to a company’s growth, a Sales Compensation Plan is the overall look at a sales rep’s compensation – their base salary, the commission structure, bonuses, etc.

A Sales Incentive Program:

However, is more flexible and fluid. Incentive plans can vary from month to month – from promotion to promotion – or even from goal to goal. They integrate useful tools, communication and allow participants to feel the benefits of rewards of non-cash incentives.

And, if you have a Sales

Incentive Program with E2 – it’s about instant gratification.
Whether your sales organization is comprise of direct or indirect sales professionals, make sure they are engaged, motivated and aligned with your goals and objectives. Not only will a sales incentive program have benefits for the participant, the program will also positively impact many facets of day-to-day business.

Such incentives might also work outside of sales, he suggests. In some schools, teachers get reward for a different kind of output: student test scores. To lessen the risk that they’ll focus too much on test preparation, supervisors might add rewards for certain activities, like teaching critical thinking skills.
The key is to use activities a company already tracks. “You’re not creating a whole new reporting system,” Rao says. “You’ve collected that data. Now, you translate it into an incentive package.”