What should an Inside sales incentive structure look like?

09 October 2015 Sean O'Mara

The art of inside sales is an esoteric one, and one which in accomplished “traditional” sales professionals may find themselves floundering.

However, with 40% of large companies looking to increase their inside sales headcount by 2016 (in many cases reappropriating their field sales teams) it’s certainly a rapidly expanding field with which it pays to be conversant.

The Rise of Inside Sales

The reason behind this presto-chango conversion to inside sales is threefold according to Albrecht, Seley and Heller’s white paper Outside In: The Rise of the Inside Sales Team.

“1- B2B Organisations are under margin pressure and are seeking more efficient ways to sell. 2- B2B buyers are becoming more comfortable using the Web, social media and email to inform purchasing decisions. 3- Videoconferencing and collaboration technologies let inside salespeople create customer intimacy without field interaction.” – Albrecht, Seley and Heller.

With the shift toward inside sales an established necessity, it stands to reason that the business of recruiting and retaining talented sales professionals is of paramount importance.

Heller concurs:

“It is absolutely critical to retain talented inside sales professionals… Companies need to consider retention strategies, competency models, coaching and career progression for inside sales, just as they do for their field sales organisations.” – Kyle Heller.

With this in mind, incentive structures need to be geared towards retaining and developing talent and this sometimes jars with the traditional image many corporations still harbour of inside sales professionals as script-reading drones.

Compensation practices

Compensation practices vary from organisation to organisation depending on such factors as size, sales volume, growth rate and whether their inside sales team are augmenting an additional field sales team.

The latter can be a source of frustration as Seley observes:

“It is demotivating to give an inside salesperson a quota and commission plan, but make them dependent on field sales to close deals. If a team quota is in place, it is still important to carve out what inside reps are responsible for, and compensate them on that contribution.” – Anneke Seley.

It follows, then, that best practice requires a tangible link between incentive pay and sales, although the correlation is not always this direct.

Commission v quota

Growth hungry start ups tend to give greater rewards the sales professionals who are facilitating their growth, and so many smaller companies (around 95%) favour commission based incentive structures.

This makes sense as the inside sales team are likely to have complete autonomy over their own accounts and so greater accountability than inside sales professionals who are paired with a field sales team (closers) or part of a key account team and thus less directly influential upon the result.

Inversely, quota based incentive structures are favoured by larger companies (around 90%) that boast a more diverse sales force where the responsibility for closing a deal is shared. While quota bases structures make sense on paper, the setting of quotas is a point of contention amongst inside sales teams.

Quota allocation is often oversimplified (especially by larger companies) by being spread evenly across the team based on historical sales or what’s in their pipeline. This can lead to aggressively testing targets in some cases (and thus, decreased productivity and motivation) and unfairly low cases in others (and thus, compensation becomes disproportionate to sales).

Challenges

As well as quota setting, inside sales has two main intrinsic challenges:

Sales forecasting accuracy– An overly-optimistic sales forecast is a virtual guarantee of unrealistic quotas, which in turn leads to an underpaid and disengaged sales force.

Pay competitiveness- As businesses scramble to hire and retain the cream of the sales crop it is important that if they expect peak performance, then a competitive pay scale is the way to assure it. Scrimp on costs and you’ll get the salesforce you pay for!