The Challenge: A major European manufacturer experienced steadily rising sales during a 10-year period, based on business expansion into China. Indeed, the company had become a major employer, with more than 10,000 employees and five lines of business operating in the country.

Its corporate-wide sales incentive plan (SIP), designed to stimulate sales growth in China, had been working for eight years without significant changes. But the results of a recent employee engagement survey showed both management and the sales leadership didn’t perceive it as an efficient or effective system. Comments on a newly launched special recognition program also indicated there was room for improvement in performance-incentive initiatives.

Managers argued that the incentive system was leading to average performance, rather than motivating high-performing individuals and teams. Further, they were concerned that the sales incentive system was designed with a one-size-fits-all philosophy that ignored the diverse characteristics of different business units.

With the goal of increased employee satisfaction and productivity in mind, and after careful consideration, the company decided to partner with Aon Consulting to help map out a solution.

The consulting process

Aon began the process by closely examining the sales incentive program and restructuring it to be more effective To identify the best approach to the company’s sales incentive program, a three-step process was carried out.
It involved:

1. Information collection. The internal diagnostic entailed a series of interviews with top management and business unit leaders, coupled with focus group meetings with select sales staff. An external benchmarking of 15 competitors looked at the features of each company’s sales incentive plan, as well as the design rationale for their plans.

2. Gap analysis. This report focused on both internal and external comparison of the company’s sales incentive plan. It also critiqued the current system and indicated the major areas that needed optimization.

3. Management workshop. During a workshop for senior leadership, Aon consultants presented the gap analysis, validated findings and recommended changes. Discussions at the workshop led to an action plan designed to optimize the company’s sales incentive program.

The findings clarified Benefit Incentives on Personal Terms

The diagnostic phase of Aon's examination revealed that many aspects of the current plan were working well. The external benchmarking also indicated the plan was generally consistent with market norms, especially for higher-level positions.

At the same time, the diagnosis indicated there was room for improvement in three critical areas. First, it was hard to see or understand the link between the salesperson’s results and the incentive payment that he or she received. Performance measures were numerous and often outside the control of the salesperson. Determining the sales incentive required complex calculations, and the necessary data was difficult to obtain.

Second, the plan encouraged an average-oriented culture, with only a modest difference in incentive payments between good and poor performers. Plus, salespeople had limited opportunity to earn more for over-achievement.

And finally, the plan wasn’t aggressive enough for junior-level positions. The pay mix was heavily weighted toward fixed compensation, and there was no special recognition bonus for top-selling individuals or teams.

zeroing in on what was needed for sustaining high sales growth

With China as the backdrop, the company worked with Aon Consulting to address program shortcomings, developing solutions aligned with the company’s values and focused on sustaining high sales growth while creating a more performance-oriented culture.

The business leadership team identified the most critical action steps necessary for instituting sales incentive changes and came up with a plan of action for implementing the changes within each business unit.