Is it Ok to Double Bonus?
Recently I was asked by one of my multi-national clients how they should handle credit for a new, large customer that will span several countries. The regional manager is guiding the effort, but reps from several countries are also involved – helping coordinate the sales effort with local buying authorities and managing currency, customs, and delivery issues. One of the local reps was instrumental in getting the deal started. All of the sales reps, including the regional manager, are on goal-based incentives. The key question became: is it ok to double bonus all of these reps for this one sale?
The answer depends, in part, on how the goal was initially set and if there was any provision for double crediting when goals were allocated. Sometimes each sales rep is an island unto themselves, and the sum of their goals equals the overall sales budget. Other times some overlap is built into the system of goal allocation and the sum of the individual goals may equal more than 100% of the overall sales budget. If the goals were set with the planned overlap, then the answer is easy – it’s fine to reward with double credit because the reps were double goaled. But what if the goals weren’t set that way at the start?
A golden rule of sales compensation design and management is the compensation plan should NEVER conflict with ethics for the business or the customer. If you find the compensation plan is stifling your ability to make an ethical choice, then you need to think outside of the compensation plan. Usually the solution is found by considering a plan that involves the word AND rather than the word OR. Combine rather than divide, while considering the actual risks of “double bonusing.”
I happen to know that the sales compensation plan is capped and has relatively little pay at risk. In this case, the true “risk” of double bonusing, even if it means overpayment, is miniscule compared to the value to be gained from closing the sale. Even if every rep involved reached their maximum bonus because of one deal being accredited equally to all of them, the cost would be a rounding error on the profit to the company from the deal. Don’t get too hung up on “fairness” in this kind of situation. There could hardly be a more perfect illustration of the axiom can’t see the forest for the trees.
In this situation there is also the possibility of crediting the country reps with the value that will accrue in each country, and the regional manager for the total sales value from all countries. Perhaps the rep who originated the deal would get a bit of extra credit, as well. The point of sales compensation, contrary to some beliefs, is not to create a perfectly precise economic deal, but to motivate and reward sales reps for generating sales that are profitable and strategically valuable for the company. If your reps are working against each other, hiding deals, or actively avoiding help closing a huge deal because they fear losing compensation – then you are not getting the intended value from your compensation plan.
You also need to consider that every reasonably written compensation plan has a management discretion clause. Often this is used to limit credit for windfalls or blue-bird deals, but it can also be used to provide extra-credit when it is appropriate to do so. Remember, your compensation plan is a strategic tool to be used to ensure your sales reps’ goals are aligned with those of your company. When they conflict with one another, then you need to adjust the compensation plan…not the company strategy.