INCENTIVES
Increase Sales with Self-Selected Incentives RAGHU BOMMARAJU AND SEBASTIAN HOHENBERG
Every year over the recent past, U.S. companies have doled out $800 billion on sales force incentives. And what have they gotten in return? These incentives are supposed to motivate the sales force – the whole sales force. But most of the incentives end up filling the coffers of the top performers, leaving the middle and lower ends of the team wondering what happened to their incentives.
The perfect incentive structure should comprise the right combination of targets and rewards that would keep everyone in the sales force motivated. However, sales forces consist of various individuals who differ substantially in their preferences and needs. Each rep is unique and
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responds to different sets of steering mechanisms. For instance, evidence indicates that some salespeople are motivated by high bonus levels, while others may prefer multi-tiered targets. Thus, in theory, tailoring incentives to every individual would be the perfect way to motivate each salesperson. However, we do not see such fine-grained customization of incentive structures in practice. Mainly to avoid the cost, complexity, and fairness issues associated with incentive customization, most companies today rely on simple one- size-fits-all approaches to sales force incentivizing – offering identical incentives to all the members of their sales force. Moreover, most companies today follow a top-down
approach to incentivizing and assign these identical incen- tives to their salespeople, with management as the sole decision maker regarding the incentive structure. This leaves the salespeople with nothing to say and may lead to a ho-hum attitude and a lack of commitment to incen- tives. Thus, it’s not surprising that salespeople complain about their incentives when management sets unrealistic sales goals.
But we’ve developed an actionable self-selected incen- tives scheme based on three decades of research on sales incentives, backed by research on goal setting in psychol- ogy that suggests self-selected incentives can be an apt alternative to assigned incentives.
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