By Steven A. Rosen
Many companies run Presidents Club, STAR Club and Summit programs to reward and recognise their top sales performers. Usually there is money or a trip plus special recognition associated with being a “top” performer.
The question is: Does your program truly reward top performance and how do you know?
In building a Top Performers Program, sales management needs to decide what they want to reward. This can be a challenging process of defining what top performance looks like. Many companies I work with tie their program to sales vs. objectives. Assuming this is the way your company defines performance, then the first challenge is, how well do you set quotas?
For this to work effectively, quotas need to be set fairly against both large and small territories. Management needs to be able to understand opportunities and challenges in each territory when quota setting. Given fairly stable product lines you can probably do a relatively good job in setting quotas.
Where I find companies encounter issues is when they use percentage to quota as their benchmark. By using percentage to quota they give smaller less developed territories a distinct advantage in rising to the top. It is much easier to show big percentage increase over a smaller base of business in comparison to a large base of business. Potentially this may be a problem, for when a new rep comes into a territory all of a sudden they are a top performer. Your sales rep with a large base of business that brings in a large amount of dollars to the company ends up being missed in this type of plan.
Conversely if a company looks at dollars over quota and rewards the sales rep with the largest dollar increase over quota, reps with smaller territories don’t stand a chance at winning.
What to do?
One way to solve the issue of large vs. small territories is to use both percentage and dollars over quota as the benchmark. There are ways to incorporate both percentage over quota and dollar over quota.
The best way I found is to force rank all sales reps based on their relative performance on percentage over quota and force rank them again on dollars over quota. In other words the sales rep that has the highest percentage sales increase to quota in the company gets ranked 1. You then go through the rest of the sales reps and assign a ranking based on how they stack up.
You then repeat the same process for sales dollars over quota.
By adding the rank for both percentage over quota and dollars over quota, each rep gets a score. The rep with the lowest score is number one and so on.
You can get fancy and try different weightings for percentage and dollar growth. The example I described above is a 50/50 split. If one is more important than the other than you can use a 60/40 or 70/30 split.
When designing your sales “Top Performer” incentive program, it is critical that your plan is fair and equitable. Here are a couple things that you need to look at:
- Ensure that all sales reps have an equal opportunity;
- Management is clear on what constitutes top performance;
- Ensure that you look at both percentage and dollar growth over quota;
- Test the program based on previous year’s data to see what weighting you would put to each factor;
- Speak to your sales people to get additional input.