Kickers: Sales Compensation Plans Explained
In the world of sales, compensation plans play a crucial role in motivating and rewarding salespeople for their efforts and achievements. One such element of these plans is the 'Kicker'. The term 'Kicker' refers to an additional incentive or bonus that is given to salespeople when they exceed their sales targets or quotas. This glossary article will delve into the concept of Kickers in sales compensation plans, explaining their purpose, structure, benefits, challenges, and more.
Understanding the intricacies of sales compensation plans, including Kickers, is essential for both salespeople and sales managers. For salespeople, it helps them understand how they can maximise their earnings and what they need to do to earn these additional incentives. For sales managers, it assists in designing effective compensation plans that not only motivate the sales team but also align with the company's overall sales strategy and goals.
Understanding Kickers
The term 'Kicker' originated from American football, where a kicker is a player who scores extra points after a touchdown. In sales, a Kicker is an extra incentive or bonus that is given to salespeople when they exceed their sales targets. The key characteristic of a Kicker is that it is not a part of the regular compensation but is an additional reward for exceptional performance.
The purpose of a Kicker is to motivate salespeople to not just meet their sales targets but to exceed them. It serves as an extra push for those who are close to reaching their targets. It also encourages healthy competition among the sales team, as everyone strives to earn the additional bonus.
Types of Kickers
There are different types of Kickers, and the type used depends on the company's sales strategy and the nature of the sales job. Some companies offer cash bonuses as Kickers, while others may offer non-cash incentives such as trips, gifts, or recognition awards. The value of the Kicker usually increases with the level of sales achieved.
Another way to categorise Kickers is based on when they are given. Some companies offer Kickers on a quarterly or annual basis, while others may offer them on a deal-by-deal basis. The timing of the Kicker can influence the salesperson's behaviour and strategy, so it needs to be chosen carefully.
Calculating Kickers
The calculation of Kickers can be complex, as it needs to take into account various factors such as the salesperson's base salary, commission rate, sales target, and the level of sales achieved. Some companies use a percentage-based approach, where the Kicker is a certain percentage of the sales made above the target. Others may use a tiered approach, where the value of the Kicker increases with each tier of sales achieved.
Regardless of the method used, the calculation of Kickers should be transparent and easy to understand. This ensures that the salespeople know exactly what they need to do to earn the Kicker and how much they can potentially earn. It also helps to avoid any disputes or misunderstandings later on.
Benefits of Kickers
Kickers offer several benefits to both the salespeople and the company. For the salespeople, Kickers provide an opportunity to earn additional income on top of their regular compensation. This can be a significant motivator, especially for high-performing salespeople who consistently exceed their targets.
For the company, Kickers can help to drive sales and increase revenue. By incentivising salespeople to exceed their targets, Kickers can lead to higher sales volumes. They can also help to align the sales team's goals with the company's goals, as the salespeople are rewarded for contributing to the company's success.
Improving Sales Performance
One of the main benefits of Kickers is that they can improve sales performance. By offering an additional incentive for exceeding targets, Kickers can motivate salespeople to put in extra effort and strive for higher sales. This can lead to an overall improvement in the sales team's performance.
Furthermore, Kickers can help to attract and retain high-performing salespeople. These individuals are often motivated by financial rewards, and the prospect of earning a Kicker can be a strong attraction. Similarly, the potential to earn Kickers can help to retain these high performers, as it provides an additional source of income and recognition for their efforts.
Aligning with Company Goals
Kickers can also help to align the sales team's goals with the company's goals. By tying the Kicker to the company's sales targets, it ensures that the salespeople are working towards the same objectives as the company. This can lead to a more cohesive and effective sales strategy.
Moreover, Kickers can be used to drive specific behaviours or outcomes that are aligned with the company's strategic goals. For example, a company may offer a Kicker for selling a new product or breaking into a new market. This can help to focus the sales team's efforts on these strategic priorities.
Challenges of Kickers
While Kickers offer several benefits, they also come with certain challenges. One of the main challenges is the potential for gaming or manipulation. Since Kickers are based on sales performance, there is a risk that salespeople may engage in unethical or short-term behaviours to achieve their targets and earn the Kicker.
Another challenge is the complexity of calculating and administering Kickers. This can be time-consuming and resource-intensive, especially for large sales teams or complex sales structures. It can also lead to disputes or misunderstandings if the calculation is not transparent or if the salespeople do not understand how the Kicker is calculated.
Managing Gaming and Manipulation
One of the ways to manage the risk of gaming or manipulation is to have clear and strict rules around sales practices. This includes having a robust sales process, regular audits, and strict penalties for unethical behaviour. It also involves training the salespeople on ethical sales practices and the consequences of gaming or manipulation.
Another approach is to design the Kicker in a way that discourages gaming or manipulation. This could involve using a balanced scorecard approach, where the Kicker is based on a combination of sales performance and other factors such as customer satisfaction or product knowledge. This ensures that the salespeople are rewarded for overall performance, not just sales.
Managing Complexity
To manage the complexity of calculating and administering Kickers, companies can use sales compensation software. This software can automate the calculation of Kickers, making it faster and more accurate. It can also provide real-time visibility into the sales performance and the potential Kicker earnings, which can motivate the salespeople and reduce disputes.
Another approach is to simplify the Kicker structure. This could involve using a flat rate for the Kicker, rather than a tiered or percentage-based approach. While this may reduce the motivational effect of the Kicker, it can make it easier to understand and administer.
Best Practices for Using Kickers
When using Kickers in sales compensation plans, there are several best practices to follow. These include aligning the Kicker with the company's strategic goals, making the Kicker achievable but challenging, and communicating the Kicker clearly and regularly.
It's also important to review and adjust the Kicker regularly, based on the sales performance and the company's changing goals. This ensures that the Kicker remains relevant and effective over time.
Aligning with Strategic Goals
The Kicker should be aligned with the company's strategic goals. This means that the Kicker should be tied to the sales targets or outcomes that are most important to the company. This could be selling a new product, breaking into a new market, or increasing the average deal size.
By aligning the Kicker with the strategic goals, it ensures that the salespeople are working towards the same objectives as the company. It also helps to focus the sales team's efforts on the most important areas, which can lead to better results.
Making the Kicker Achievable but Challenging
The Kicker should be achievable but challenging. If the Kicker is too easy to achieve, it will not motivate the salespeople to put in extra effort. On the other hand, if the Kicker is too difficult to achieve, it can demotivate the salespeople and lead to frustration.
To find the right balance, companies can use historical sales data and performance benchmarks. This can help to set a Kicker that is challenging but achievable, based on the sales team's capabilities and the market conditions.
Communicating the Kicker Clearly and Regularly
Communication is key when it comes to Kickers. The salespeople need to understand what the Kicker is, how it is calculated, and what they need to do to earn it. This information should be communicated clearly and regularly, to ensure that everyone is on the same page.
Regular communication also helps to keep the salespeople motivated and focused on the Kicker. This can involve regular updates on the sales performance and the potential Kicker earnings, as well as recognition and celebration when the Kicker is earned.
Conclusion
Kickers are a powerful tool in sales compensation plans, providing an additional incentive for salespeople to exceed their targets. When used effectively, they can improve sales performance, align the sales team's goals with the company's goals, and drive specific behaviours or outcomes.
However, Kickers also come with certain challenges, such as the potential for gaming or manipulation and the complexity of calculation and administration. These challenges can be managed through clear rules, training, balanced scorecard approaches, sales compensation software, and simplified structures.
By following best practices such as aligning the Kicker with strategic goals, making it achievable but challenging, and communicating it clearly and regularly, companies can maximise the benefits of Kickers and minimise the challenges. This can lead to a more motivated and high-performing sales team, and ultimately, higher sales and revenue for the company.
Transform Your Sales Strategy with Project36
Ready to elevate your sales compensation plans and drive exceptional results? Project36 is here to help. With our deep expertise in HubSpot solutions, cutting-edge AI-enabled chatbot development, and proven OKR methodology, we're equipped to transform your sales processes and align them with your strategic goals. As we journey towards B-Corp status and uphold the highest standards in compliance and security, we ensure that your sales strategies not only deliver results but also contribute to a greater purpose. Whether you're looking to enhance your digital presence or revolutionize your sales approach, our global experience positions us to tailor solutions to your unique challenges. Start the conversation with Project36 today and unlock the full potential of your sales team.
