This year will see the enforcement of the EU’s clampdown on bankers’ bonuses, which requires banks to restrict bonuses to 100% of salary. This has already had a major impact on the market with the likes of HSBC and Goldman Sachs finding ways to circumvent the cap entirely by offering shares and other non-salary rewards.
All of this comes after a tough couple of years for the banks with mis-selling scandals, market rigging and embarrassing IT glitches. So how can banks make sure they legally offer bonuses that produce results and motivate employees?
Sales are critical to the long-term visibility of any business, essential in driving growth and securing future investments. In order to motivate and encourage sales teams to consistently reach and even exceed their targets, to sell in line with company objectives and in compliance with regulators, many organisations offer variable compensation plans to reward and incentivise workers.
However, compensation plans can drive the opposite behaviour when they aren’t written well. Rather than motivating salespeople to sell in the best interests of the business and its customers, they can actually encourage salespeople to engage in unethical sales behaviour.
Often, these plans are put in place to promote high targets, but fail to recognise the effect this would have on sales methods, sales ethics, and the long-term result these have on the business and customers.
Effective sales plans should motivate salespeople to sell correctly and successfully to the benefit of the sales rep, company, customers and in the case of some industries, like banking, entire economies.
By contrast, the mis-selling scandals have demonstrated how poorly designed plans can motivate employees to take an aggressive approach to closing a deal while business leaders skip the checks to prevent abuse of the system. It is important for sales teams to be successful, but this should not be to the detriment of the customer, company reputation, or the bottom line.
So how can businesses ensure their plans are motivating the right kind of behaviour?
Data holds the key
Major advancements in technology have turned us into a data-driven society. This constant stream of accessible information has changed the way live, think and work. The good news is this also applies to the sales process. ERP, CRM, SPM and even HR systems all create valuable, insightful data that helps companies create relevant and motivational incentive schemes.
Unfortunately, there are two main problems when it comes to big data: collecting it and then analysing it. Finding this siloed data and pooling it into a central hub for processing – particularly when it is often spread across disparate, manual applications – can take a considerable amount of time.
By automating and integrating this data, businesses can start to base compensation plans on actual analysis and insight, resulting in a more rewarding, intuitive and intelligent system for both the company and its sales teams.
Once all the data has been compiled in one place, specific tools can help turn it into actionable information. With data being created at such high speeds, it is often difficult to keep up, and in order to make the best decisions a business needs access to up-to-the-minute data.
Big data requires a deep understanding of the business and it is essential to know the right questions to ask. This is where many businesses stumble.
Big data has no value if it is locked up in different systems and the information retrieved only by data scientists rather than easily interpreted by business leaders. However, when made accessible and given context, big data offers formidable competitive advantage, as well as highlighting opportunities and potential problems before they impact the top and bottom line.
Making the most of compensation plans by using big data is essential, but undoubtedly a challenge for most, so where to start?
Many organisations still use spreadsheet applications to manage their entire incentive programme, which can be valued at millions of pounds. These spreadsheets aren’t infallible and they certainly aren’t scalable, meaning users often end up with different tables for each region that will never interact with each other and offer a full read over the entire compensation programme.
Once users have access to their data, they then need to know what they want to learn from it.
Further, a solid incentive compensation plan is built around data, not intuition or conjecture, so businesses should use benchmarks derived from hard data to measure performance.
A solid foundation of data is one of the best assets a business can have. If information it needs is swirling around in a murky pool of data, its compensation plans are more than likely based on intuition rather than facts, and audits will be a nightmare. It should ensure anyone who earns incentive compensation can trace every payment back to a particular behaviour or structured business event, as poorly managed incentive schemes are likely to drive poor employee behaviour.
Analysing big data is fast becoming a necessity for businesses seeking to get the most out of their compensation plans. The lessons learnt from it can help ensure an efficient and transparent plan for teams, and enable managers to target and end undesirable sales behaviour, while rewarding those who operate in-line with company objectives.
Sourced from Christopher W. Cabrera, founder and CEO, Xactly