Incentive Compensation Management (ICM) is the process of aligning sales rep performance with organizational goals. Sales teams are more likely to perform well consistently when rewarded with the right incentives.
Incentive compensation management is often used in sales-based organizations, where commission-based pay plans are common. These plans give employees a percentage of their sales as a portion of their total compensation.
Organizations will often have them sign contracts with specific quotas attached to ensure that salespeople perform at their best. They receive a bonus if they meet these quotas; if they fail, they don't get a bonus.
The decision to provide incentive compensation should be based on factors such as:
Incentive Compensation Management (ICM) is the process of designing, implementing, and managing commission compensation arrangements. It is a strategic approach to motivate salespeople to achieve a predetermined target.
Incentive compensation is usually given in addition to base pay and bonuses and can be paid as either cash or non-cash items. Organizations use them to drive employee performance and achieve bigger business goals.
ICM can be thought of as a three-step process:
For a business to be successful, it needs a motivated workforce. And incentive compensation is just to achieve that. When well-planned and executed, it motivates employees to go the extra mile with their performance.
A business can use incentive compensation in two ways:
Incentive compensation is important because it helps companies to motivate employees. A well-designed incentive compensation plan can encourage employees to meet their targets or perform above a certain level. Besides this, it's also an excellent tool for retaining desirable employees.
Benefits of incentive compensation plans:
Incentive and compensation are two terms that are often confused, yet they are pretty different. Let's understand the differences between the two.
There are many types of incentives in compensation management. Some of the more common ones are:
In addition to these, several other types of incentives can be used in compensation management, and these include:
Incentive compensation can take many different forms. Examples include:
Incentive compensation can be an excellent way to motivate your sales staff. But if you want them to succeed, you must establish a plan based on sound principles.
Here are some best practices to keep in mind:
These are short surveys that can be sent frequently to check what your employees think about an issue quickly. The survey comprises fewer questions (not more than 10) to get the information quickly. These can be administered at regular intervals (monthly/weekly/quarterly).
Having periodic, hour-long meetings for an informal chat with every team member is an excellent way to get a true sense of what’s happening with them. Since it is a safe and private conversation, it helps you get better details about an issue.
eNPS (employee Net Promoter score) is one of the simplest yet effective ways to assess your employee's opinion of your company. It includes one intriguing question that gauges loyalty. An example of eNPS questions include: How likely are you to recommend our company to others? Employees respond to the eNPS survey on a scale of 1-10, where 10 denotes they are ‘highly likely’ to recommend the company and 1 signifies they are ‘highly unlikely’ to recommend it.
The best incentive compensation plans are ones that offer the right mix of pay, benefits, and work conditions that attract and retain employees.
As a general rule, the best incentive compensation plans have the following characteristics:
Here are some steps you can take to run a successful incentive compensation program:
Incentive compensation should be designed around the type of work your employees do and the results they want to achieve.
Here are some steps you can take to design an incentive compensation plan:
Incentive compensation management software is a tool that helps businesses, small or large, manage an organization's incentive compensation plan. Its primary purpose is to provide a streamlined process for handling employee incentives and rewards.
Not just that, it also provides managers with tools to track progress, performance, and other metrics related to incentive programs so that they can make informed decisions about how best to reward employees for their efforts.