Incentive Best Practices Are Crap

Yeah – I said it.

It’s been welling up inside me for quite a while but two triggers pushed it to Defcon 1 and made me (motivated me?) to put it down here in the blog.

First – our conversation the other day on blogtalkradio with the Compensation Café folks hit on the need for competitive information on compensation practices.  That conversation meandered into a discussion of how most companies want to be sure they’re doing what others are doing and following “best practices.”  I can understand, to a point, that from a comp standpoint knowing what the “market” is would be important.  

I could also point out that the market is what you make it and if you wanted to pay your people twice as much and expect three times as much, you could (insert obligatory Henry Ford comment here on paying above average wages to create his own market.)

The second trigger is a question was posted on the Incentive Compensation Group in LinkedIn.  The question is:

Does anyone have any market data on sales incentive trips for 2010? I'm looking for:

1. How many people are going / how many are eligible?
2. Eligibility requirements
3. Cost of trip per person
4. Spouse eligibility
5. Duration of Trip

The responses to this question were pretty similar:

• 8-15% go
• Anyone on a sales incentive plan for the full year is typically eligible (some companies lower the requirement a bit to 9 months)
• We have seen costs in the $12K-$20K per rep range (including spouse)
• Spouse is almost always eligible
• Almost always a week (don't want your best out of the field for longer than that)
• Best practices is you want to get the top 5 to 10 percent of the team.
• You want roughly 60% of the team to be reaching quota, so it is most likely that your top 5-10% of the team will be achieving 110% of quota.

The Answers Are All Crap

I’m not beating up those that answered.  They are telling you the truth.  Based on my experience they’re in the ballpark.  But the reality is – IT JUST DOESN’T MATTER.  

And in truth – following these best practices will hurt you more than help you.

Invest In A Startup

How many of you would want to invest in a startup company whose product strategy was:

• It is similar to other products in the market
• It won’t do more than other products – and it won’t do less
• It will look, feel, act and in most cases, be indistinguishable from the other options customers have
• It is not based on our unique situation but is based on other companies’ delivery, operating, marketing and sales structures

I’m guessing you wouldn’t invest in that startup.  Why?

‘Cuz it is just one more commodity option.  You only want to invest in a success and you know intuitively that a “me too” product won’t be a barn-burner.

And neither will your program to influence sales behavior in your organization if you “follow best practices.”

Best Practices = Commoditization

• Your work force is different (or it should be if you’re hiring to your unique market differentiation.) 
• Your business needs are different (or they should be if you’re innovative and solving your customers real problems.)
• Your budgets are different (or should be since you don’t have the same products, pricing, margins, value as your competition.)

So why would you structure your program based on what everyone else is doing?  

Why design your program based on “average” program design.  For this discussion I’m equating average to “most often.”  In many cases most often could also be the worst program design for you – but you don’t know that from most best-practice discussions. 

Design to YOU

A while back on a webinar Ann Bares from Altura Consulting Group (Compensation Force and editor of Compensation Café) said – "don’t use best practices but focus on “best principles.”  That is one excellent description of what you should do.

There are principles of program design you should consider – but not the practices other companies use.

Design your program based on what you want to accomplish and what your audience is.  Sure – knowing what everyone else is doing is important.  Important so that you can do something DIFFERENT!

If you follow the leader in your incentive program you will simply creating a commodity experience for your sales people.  

What if you created a completely different approach – one that your sales people talked about and shared with the best sales people at your competition?  What if those people wanted in on your unique and exciting way of driving sales?  Gee… wouldn’t that be a bad thing.

Best practices do one thing for you – let you know what you shouldn’t do.