Woman with long brown hair and glasses, wearing a gray blazer, smiles and gestures with her right hand. The background has a blurred office setting on the left and a magenta-colored section on the right.

How to create a competitive advantage with incentive compensation

Incentive compensation can help you build your brand, differentiate in a competitive talent market and, in doing so, increase your chances of success in the market.

Rob Bentley , Associate Partner, Sales Effectiveness Aon Mark Hirschfeld , Vice President, Consulting Services and Strategic Partnerships More about the authors

The world is constantly changing, so the way we develop and compensate our salespeople must change as well. Let’s start by taking a look at what’s trending differently:

There are more diverse and inclusive sales organizations, where sales teams better reflect the customers to which they are selling.
Companies are fighting “information overload,” trying to figure out how to maintain the attention of their sales organization on the things that really matter.
There’s an ever-increasing pressure to attract, retain and develop top sales talent.
Many top performers are burned out and, in the spirit of “The Great Resignation” or “The Great Reassessment,” find themselves more willing than ever to entertain pitches from outside recruiters.

Sales leaders are challenged with creating a competitive advantage that will not only help them attract and develop top salespeople, but, perhaps most importantly, retain the ones who contribute to their success as an organization. Where we believe that competitive advantage lies is in the different or underutilized methods of compensation at our disposal.

To understand how these methods of compensation work together, we need to start by understanding the sales employee value proposition. Why do salespeople work for a given company? Why do they join and why do they stay? What motivates them to meet or exceed company expectations?

In our research and client work, we’ve identified 18 drivers of the sales employee value proposition, ranging from work culture and development opportunities to recognition and equity/stock options.

Illustration of a person with a speech bubble containing a question mark. Surrounding the figure are various factors influencing employment decisions, such as salary, benefits, culture, and career path. Logos for Aon and Excelerate appear at the bottom.

Of these 18 aspects, incentive compensation drivers have the greatest impact on sales employee behavior because they are performance-based. These include base salary, variable comp, awards and contests, recognition, equity/stock options (or LTIs, long-term incentives), career pathing and development experiences or programs.

Silhouette of a person holding a briefcase labeled ABC Co. with a speech bubble showing a dollar sign. Various employee benefits and awards are listed in a semi-circle above: base salary, health benefits, recognition trip, and more, ending with career path.

There are two primary dimensions in which we look at these drivers: cash vs. non-cash and the timeframe in which they are most effective at producing results. In this framework, short-term accounts for monthly up to quarterly, medium-term accounts for quarterly up to annually and long-term accounts for ongoing programs.

A table categorizing incentive strategies by time frame and type: Cash and Non-cash. It includes Immediate/short-term, Sustained/medium-term, and Ongoing/long-term incentives like commissions, contests, recognition, and promotions.

Commissions, bonuses, contests and recognition are the tools most commonly used by sales organizations. But if you’re looking to create a competitive advantage that will help you attract and retain top salespeople, particularly for more than 3-4 years, you need to tap into some of the other performance drivers at your disposal: gamification, salary/performance reviews, promotions and advancement opportunities, LTIs and personal development.

As we’ve introduced this framework into client work, questions have emerged from top sales leaders looking to use this model to help them address key business challenges. The chart below can be a guide to help you think about your specific business challenges and which levers may apply:

A table showing motivational strategies such as contests, commission, and recognition awards. Rows list objectives like reinforcing sales activities and retaining top performers, with arrows indicating the effectiveness of each strategy for specific goals.

These performance drivers should be viewed as levers or tools. If you have a retention challenge, for example, you may focus your efforts on different levers than if you have a need to drive short-term sales. The key is knowing when and where to use each one in a way that aligns with your organizational goals. The levers identified with green arrows should be your primary focus, while those in gray are your secondary areas for consideration.

Using this approach can help you build your brand, differentiate in a competitive talent market and, in doing so, increase your chances of success in the market.