Page 175 - HBR's 10 Must Reads - On Sales

HOW TO REALLY MOTIVATE SALESPEOPLE

end of a period, they work harder. We concluded that if companies
want to encourage that kind of reciprocity, they need to pay careful
attention to timing.
Other researchers are using field experiments to better under-
stand how salespeople react to changes in payment schemes, but
most of this work is so new that it hasn’t been published yet. One
paper presented at a conference in 2014 showed that if salespeople
receive cash incentives for passing tests about the product they are
selling, they will sell more. (This is an example of sales compensa-
tion based on effort as opposed to results.) Another recent field ex-
periment found that sales reps valued noncash incentives (such as
points that could be used for vacations or for items such as televi-
sions) more than the actual monetary cost of the good the points
could purchase. As more researchers and companies embrace the
use of field experiments, sales managers will learn even more about
the best ways to motivate their teams.

It Pays to Experiment
After spending a decade in academia studying sales force compensa-
tion, I sometimes wonder what would happen if I were transported
back into my job as a management consultant. What would I tell
sales force managers to do differently?
Some of my advice would be straightforward: I would urge man-
agers to remove the caps on commissions or, if they have to retain
some ceiling for political reasons, to set it as high as possible. The
research is clear on this point: Companies sell more when they elimi-
nate thresholds at which salespeople’s marginal incentives are re-
duced. There might be problems if some reps’ earnings dramatically
exceed their bosses’ or even rival a C-suite executive’s compensa-
tion, but the evidence shows that firms benefit when these arbitrary
caps are removed.
I would tell sales managers to be extremely careful in setting and
adjusting quotas. For instance, the research clearly shows that ratch-
eting quotas is detrimental. It’s tempting to look at a sales rep who
blows through her yearly number and conclude that the quota must

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