The Best Financial Way to Motivate Your Sales Team
An expanding amount of research suggests that, for most of us, more money would not make us perform better in our jobs. We are not coin-operated, in that sense.
But in one very important business function, money does motivate productivity: sales. A new research paper attempts to explain the best combination of incentives -- salaries, commissions and bonuses -- that kick sales people into maximum overdrive. The work was conducted by Harvard Business School professor Thomas Steenburgh and Yale School of Management's Doug J. Chung and K. Sudhir.
Compensation design is an important issue. Done wrong, bonuses can cost you sales. Just ask Jared Franklin, president, of Chase Technology Consultants in Boston. He blogs on BNET about how his sales bonus system made employees complacent after receiving big payments.
The researchers outline a compensation scheme that spreads out rewards and keeps interest high among the sales team throughout the sales cycle. Here are two of their key findings:
- Quarterly bonuses increase sales force productivity when combined with annual rewards. Monthly bonuses, however, aren't as effective. "In the absence of quarterly bonuses, a failure in the early periods to accomplish targets caused agents to fall behind more often...," according to the researchers.
- Top performers tend to dial back after meeting their quotas, so overachievement commissions are effective at keeping them selling.