How to Incentivise Sales for Financial Services Industry – Part 2

Guidelines on sales incentives from European and UK financial regulators over the last ten years have had a massive impact on the design of incentive plans. In this article, we examine some key considerations for financial institutions as they seek to balance compliance with core business imperatives; including how to ensure sales targets are met, how to recruit and retain talent and how to safeguard customers. We will also look at specific aspects of design that need to be introduced and some additional steps that organisation should take to manage new incentives effectively.

Key Considerations

For financial services organisations looking to demonstrate incentive program best-practice, there are three key considerations. Together, these considerations form a set of design principles with which to guide plan review and redesign.

  • Recognise the link between selling behaviour and customer experience. Achieving sales targets depends on retaining current customers and winning new ones. Sales incentive design helps generate and reinforce a culture that is positive for customer experience.
  • Review incentive design to identify where plans are non-compliant and where they could better drive selling behaviour within the spirit of the regulations.
  • Consider what else needs to be improved to support the shift in design; including base pay, performance management process, compliance processes, and customer experience testing such as Net Promoter Scores.

Changes in Design

The FCA guidelines provide helpful definitions of what compliant and non-compliant sales incentive plans look like.

Examples of compliant plan design include:

  • Linear calculation of payout with no accelerators for overperformance.
  • Consideration of the long-term impact on the client, i.e., using customer feedback as part of the assessment of performance. Many companies are now using Net Promoter Scores as part of a Balanced Scorecard.
  • Use of qualitative criteria to calculate payout. Effectively this means using a wider assessment of contribution including performance ratings.
  • Using a common method of incentive calculation across the salesforce.
  • Using volume as a performance measure rather than profit margin.
  • Use of organisation measures, e.g., company profitability.

When it comes to compliant design, financial services organisations have been introducing a raft of changes. In the past few years, we have seen noticeable changes in both structure and management, including:

A shift in the employer value proposition. As the focus on product-related commission reduces as the prime motivator, businesses need to address other aspects of total reward to attract and retain talent; including base pay, career progression and company culture.

Changes in pay mix. Total Target Cash (TTC) cannot reduce significantly for the high performer. This means increasing base pay to compensate for reductions in incentive plan payout. This also means reviewing pay benchmarks and reviewing pay structure and progression to ensure not only opportunity for the top talent to progress but also equal pay to be assured.

Changes in performance measures:

  • The use of team bonus pools requires accurate target-setting and performance measurement around team targets. These are likely to be more profit-related than revenue-related as profit is more reflective of overall company performance and ability to pay out incentives.
  • The use of customer satisfaction measures like Net Promoter Score needs to be robust and applied at a team rather than an individual level.
  • Compliance measures need effective piloting and consistent application. For example, where telephone calls or emails are monitored, there needs to be a robust scoring system to back up any judgement to withhold payout.
  • Where overall individual performance is used to determine pool share, the rating process needs to be fair and robust.
  • Qualitative, discretionary management judgement needs to be applied fairly.

Changes in plan structure. Plan structure has shifted from more complex accelerated plans to simpler linear plans.

Some products are complex and longer-term in impact. The credit point needs to reflect customer satisfaction and seller accountability, e.g., the difference between booking and profit realisation in FX dealing.

Reducing payout for non-compliance and customer complaints. Reductions need to be consistent with the scale of negative impact.

In support of this new approach to incentive design, there has been a corresponding shift in the application of sales performance management and monitoring solutions. A robust system of monitoring is essential to ensure both accountability and auditability.

Access to accurate and timely performance data is a cornerstone of any good incentive program. Monitoring and recording behaviour supports both qualitative and quantitative analysis, with key considerations including call monitoring, file reviews, NTU’s, cancellations, complaints and renewals.

We have also seen a renewed emphasis on sales management as a discipline, with key metrics evolving behind simply hitting a target to ”softer” skills such as people management, quality assurance, training and development.

There has also been a significant increase in the use of Sales Performance Management or Incentive Compensation Management solutions to help businesses manage performance, calculate payouts and generate meaningful business intelligence to support future decision making.


The framework for incentive compensation rewards has been redrawn in recent years. Next generation plans are so much more than simply increasing base pay and limiting value multipliers. Financial services institutions must now consider a much broader range of motivators.

Plan design has changed. There is an underlying need to meet with new compliance obligations and ensure the customer is both informed and protected. Where changes are significant, they can be implemented over time to ensure employee buy-in and management of financial impact. However, regulators need to see movement in the right direction, even if the business is challenged.

If you are in the process of updating your sales incentive plan and think you could benefit from some expect advice, we are offering a free incentive design workshop, tailored to the needs of financial services organisations. Sign up using the button below:

SPM Assessment Workshop

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