The sales bonus scheme may be costing you (or earning you) a lot but it may be a waste of money. So argue Zoltners, Sinha and Lorimer in the Journal of Personal Selling & Sales Management (Spring 2012).
Success in complex markets and with complex sells – for example, supplying a customised solution that requires partnering with the client to build new ways of using technology – will not be driven by incentives. A stack of other factors drive that business: skills, information, support, performance management processes,….. And Zoltners and his team report a list of unintended consequences of relying on incentives.
Going back over 50 years, there is tons of social science research supporting the idea that incentives impede the creative abilities of individuals in complex situations. The problem is that incentives can focus salespeople’s attention away from the content of their work to the consequences of it.
And, as academics like Matsuo and Evans suggest, in complex sell situations we need innovative thinking and a willingness to try new ways to solve problems. Matsuo discovered that Japanese sales forces are more innovative when they evaluate and reward salespeople for their behaviour and knowledge—a practice that is typical in sales forces that pay salespeople mostly through salary. Sales forces are less innovative when they evaluate and reward salespeople on outcomes.
In his July 2012 HBR article, Dan Pink reports the microchip firm that replaced the massive sales bonuses with higher basic pay and a bonus linked to corporate goals. Sales increased. With even GSK in the USA canning sales bonuses, Pink asks us to challenge the orthodoxy: “selling today is sophisticated, complex work—and the people doing it therefore require incentives beyond a dangled carrot.”