incentives

 Diane’s company was able to hit its yearly sales goal early, with three months still left in the year. While she was excited about it, she also realized that it could create some problems. The company’s commission plan did not give salespeople any extra money for making sales after they reach 100% of their goal. As a result, Diane noticed her teams had less reason to close more deals before the end of the year. In fact, some salespeople might benefit from waiting until January to close deals so those sales count toward next year’s quota.

 As a result, this can create bigger problems for the company. Sales could slow down for the rest of the year, and rippling into other departments like finance, customer service, and implementation that are expecting new customers. Diane realized that the issue was not necessarily that her team had become unmotivated. Instead, the compensation system was designed in a way that unintentionally encouraged employees to stop selling once they reached their annual goal.

Most executives underestimate what a coasting quarter actually costs, because the revenue line still looks fine, but the damage shows up in three places.

The first problem is the loss of momentum. In sales, consistency is imperative to maintain client relations, whether that means making calls or handling customer concerns. If the sales team slows for three months, they cannot simply return in January and perform at the same level immediately.  Momentum is built through consistent effort, and if that momentum is lost, it takes time and effort to rebuild. 

The second problem is the ripple effect on other departments. If salespeople intentionally delay deals, then departments like implementation and customer success may not have enough business. This is the example of competitive incentives across functions, where each department makes decisions based on its own goals, but those goals do not necessarily align with what is best for the company as a whole.

Sandbagging is when salespeople intentionally delay closing deals until the next quarter or year because it benefits them financially. Leaders can prevent this by offering uncapped commissions, providing additional incentives for exceeding quota, and rewarding honest sales reporting.

The third problem is the loss of trust within the company. If other employees are aware that some salespeople are intentionally holding deals until the next year, they may begin to question the sales pipeline and the forecasts they are seeing.  Over time, this can make it harder for teams to trust each other and properly plan for the future.

Once the annual quota has been reached, leaders need to give their teams a new reason to keep them engaged. If the original financial incentive is gone, simply asking employees to keep selling may not be enough. Instead, leaders can introduce new goals, recognize employees for continued performance, and show how their work contributes to the success of other teams and the overall company. 

Moves For Success 

The first step for an executive is to recognize what they can and cannot immediately change. Compensation plans are approved annually and, realistically, cannot be adjusted in the middle of the year. Instead, leaders need to find a new source of motivational factors that they have more control over.   

 If employees know there is no additional financial reward for exceeding their goal, executives should recognize that rather than expecting employees to continue working harder simply out of loyalty. Building that transparency can help build credibility and encourage employees to be more honest about what motivates them. As the idea of people first leadership suggests, employees may be willing to put more effort when they feel like their leaders understand and value their perspective. 

      2. Set up new goals.

 Creating new goals can give employees something meaningful to work towards while still benefiting the company. This can include reaching a new group of customers, earning company funded certifications, learning new products, or developing skills for an upcoming launch. These goals help employees see the broader picture rather than simply asking them to continue chasing a target that they have already achieved

    3. Create recognition and new opportunities. 

Even though compensation is not available, leaders can still make continued performance visible. Employees who have helped make an impact past the quota could receive recognition from senior management or more opportunities to lead more important projects. As they build that greater responsibility, it is imperative that employees feel recognized. These rewards do not replace financial incentives, but they can give employees another reason to remain engaged.

Why this Works 

These approaches work because employees are motivated by multiple factors. Money is an important motivator, but once employees feel they have been paid fairly, they may become more motivated by purpose, autonomy, and mastery. Leaders can give employees autonomy over what they pursue, opportunities to master new skills or products, and a clearer sense of purpose. 

In addition, executives increasing how often they provide feedback, like shorter weekly check-ins, can help employees see their progress toward their new goals. Immediate feedback is what keeps a goal alive because employees can regularly see what they are accomplishing and where they can improve. This helps maintain momentum even after the original sales target has been reached.