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Long-term Incentive Compensation
Long-term incentive compensation (LTIC) is a performance-based reward system designed to motivate sales representatives to achieve sustained organizational goals over an extended period, typically beyond one year.
It aligns employee interests with those of the company, driving performance and fostering loyalty. LTIC is often used for sales reps and senior executives to encourage long-term success and accountability.
What is long term incentive compensation?
Long term incentive compensation refers to rewards that are offered to employees, especially in sales and leadership roles, to drive sustained performance over a period of several years.
These incentives are typically performance-based and designed to align individual goals with long-term business outcomes. Common examples include stock options, performance shares, and restricted stock units (RSUs).
What are the types of long-term incentive compensation?
LTIC plans can take various forms, tailored to organizational needs and roles. Common types include:
- Stock options: Sales representatives are given the right to purchase company shares at a predetermined price after a specific period.
- Restricted stock units (RSUs): Shares are granted but only become fully owned by sales representatives after meeting certain conditions, like tenure or performance milestones.
- Performance shares: Rewards are tied directly to achieving specific performance metrics over time.
- Cash-based plans: Bonuses are awarded based on long-term achievements, often linked to financial or strategic targets.
- Deferred compensation plans: A portion of the SDR's earnings is deferred for future payment, typically linked to company performance
What are the benefits of offering long-term incentive compensation for sales reps?
Long term incentive compensation offers several advantages for sales teams, including:
- Improved retention: Sales representatives are motivated to stay with the organization to realize the full benefits of their compensation plans.
- Enhanced performance: Long-term rewards drive sustained productivity and alignment with organizational goals.
- Alignment with strategic goals: Long term incentive compensation ensures that sales reps focus on objectives that contribute to the company’s long-term success, such as building lasting customer relationships.
- Ownership mentality: Plans like stock options instill a sense of ownership, encouraging sales representatives to think and act in the company’s best interest.
What is a long term incentive compensation plan and how does it work in sales?
A long term incentive compensation plan is a performance-based reward system designed to motivate sales professionals to achieve strategic goals over a multi-year period.
Unlike short-term bonuses, it focuses on sustained success and retention. In sales, it typically includes equity awards, deferred cash bonuses, or performance shares tied to metrics like revenue growth, client retention, or deal size.
These incentives vest over time, ensuring alignment with the company’s long-term vision and promoting consistent high performance.
Why is long term incentive compensation important in sales?
For sales teams, motivation often revolves around immediate rewards. However, a long term incentive compensation plan adds another layer by encouraging strategic thinking and customer relationships that pay off over time.
It helps reduce turnover, builds loyalty, and promotes behaviors that support the company’s long-term success, not just quarterly quotas.
How does long term incentive compensation work?
A typical long term incentive compensation plan sets performance goals tied to revenue growth, customer retention, or market expansion. These incentives are awarded in the form of equity or deferred cash bonuses that vest over time. The delayed nature of the reward ensures sustained performance and fosters loyalty.
Enquêtes sur le pouls des employés :
Il s'agit d'enquêtes courtes qui peuvent être envoyées fréquemment pour vérifier rapidement ce que vos employés pensent d'un sujet. L'enquête comprend moins de questions (pas plus de 10) afin d'obtenir rapidement des informations. Elles peuvent être administrées à intervalles réguliers (mensuels/hebdomadaires/trimestriels).
Rencontres individuelles :
Organiser périodiquement des réunions d'une heure pour discuter de manière informelle avec chaque membre de l'équipe est un excellent moyen de se faire une idée précise de ce qui se passe avec eux. Comme il s'agit d'une conversation sûre et privée, elle vous permet d'obtenir de meilleurs détails sur un problème.
eNPS :
L'eNPS (employee Net Promoter score) est l'un des moyens les plus simples et les plus efficaces d'évaluer l'opinion de vos employés sur votre entreprise. Il comprend une question intrigante qui permet d'évaluer la loyauté. Voici un exemple de questions posées dans le cadre de l'eNPS Quelle est la probabilité que vous recommandiez notre entreprise à d'autres personnes ? Les employés répondent à l'enquête eNPS sur une échelle de 1 à 10, où 10 signifie qu'ils sont "très susceptibles" de recommander l'entreprise et 1 signifie qu'ils sont "très peu susceptibles" de la recommander.
Sur la base des réponses, les salariés peuvent être classés dans trois catégories différentes :
- Promoteurs
Employés qui ont répondu positivement ou qui sont d'accord. - Détracteurs
Employés qui ont réagi négativement ou qui ont exprimé leur désaccord. - Passives
Les employés qui sont restés neutres dans leurs réponses.
How do you design an effective long term incentive compensation plan for sales roles?
To design a high-impact long term incentive compensation plan for sales roles:
- Start by identifying long-term objectives such as recurring revenue growth, enterprise deal closure, or account expansion.
- Align these goals with measurable KPIs, and choose appropriate reward vehicles like stock options, RSUs, or milestone-based bonuses.
- Ensure the plan includes a clear vesting schedule, communicates value to the sales team, and complements existing short-term incentives.
- Customization by role and quota size helps boost engagement and retention while supporting strategic sales outcomes.
How does long-term incentive compensation differ from short-term incentives?
While both long term and short-term incentives (STIs) aim to motivate sales representatives, they differ in keyways:
- Timeframe: STIs focus on immediate goals, typically within a year, while LTIC rewards longer-term achievements spanning multiple years.
- Scope: LTIC aligns with strategic goals like market growth, innovation, or sustained profitability, while STIs are tied to specific, short-term metrics like quarterly sales targets.
- Impact: LTIC fosters loyalty and long-term commitment, whereas STIs primarily drive immediate performance.
- Risk and rewards: LTIC often includes conditional rewards like stock options, which depend on both individual and company performance over time, introducing a degree of risk.
