Go to Top

The Top 5 Incentive Budgeting Tips

When approaching your boss’ office, sales incentive budget in hand, ready to ask for final approval on your incentive program, it’s one of those sweaty palm, do-or-die moments. Make a mistake here and you know it’s going to be visible, memorable—and ugly. Who wants to be remembered as the “genius” who went over budget and had to downgrade the travel incentive from Rome to Rochester?

How can you be sure that you’ve considered all the angles?

In our 40+ years in the business, we’ve seen clients struggle on their own and bring us just about every possible budgeting blunder. What can you learn from the mistakes of others? Here are our top five budgeting tips:

  1. Remember to include the fixed costs. Sure, awards will be 70-80% of your overall budget, but wait—there’s more! Don’t get so focused on refining the awards budget that you forget to include the budget for the platform, monthly operations, and communications. It’s happened! Figure out your fixed costs and then finalize your awards budget.
  2. Create scenarios to determine award projections. Create good, better, best performance scenarios to better understand your potential award spend. Calculating your awards exposure is critical, and there’s no better way to figure it out than by creating payout scenarios.
  3. Adjust your budget based on program dates. Timing matters. Review your program dates and analyze your sales history during this period. Be sure to account for historical patterns and typical sales surges. A six-month program that runs from January to June is not the same as one that runs from July through December.
  4. Verify sales. Make sure your sales reporting and verification system has integrity. That means confirming that the sale has occurred, verifying the sale—or at least a percentage—and deducting returns or spoilage from performance totals. History shows that participants are skilled at finding loopholes and exploiting them, which can deep six your incentive budget.
  5. Set a threshold for performance. You don’t want to award people for doing the minimum. When you have performers that are barely engaged, it’s appropriate to set a bar that they must hit before their sales count toward awards. That way, you aren’t rewarding underachievers for sales that are just bringing them up to par.

By learning from the mistakes of others, you can create an incentive budget that is accurate and reliable. Besides, once this foundational work is done, you can turn your attention to the other aspects of program development—like, “should the day trip be to Pisa or Florence?”

, , , ,