Sales Commission Hold Good…And They Have for Centuries
There have been all sorts of respected papers published on how best to motivate a sales force. The Harvard Business Review and the UK Institute for Employment Studies are just two of many organisations that have delved into the subject. One thing that stands out is sales commission.
Some of the solutions offered are complex, based on customer satisfaction surveys, the number of prospective accounts visited, the retention of existing accounts and caps on commissions.
But an independent survey we recently commissioned into what really drives a sales force provided a simple and stark insight; sales people that are offered cash incentives work much harder.
The research revealed that 80 percent of British sales people are motivated and more driven if there are clear and tangible incentives to be gained.
This raises a question over some standard compensation practices and implies that many probably hurt rather than help sales. For instance, caps on commissions, which many large companies use, may negatively impact long-term results by decreasing motivation and effort.
Hurting long term sales
Similarly the practice of ratcheting quotas, that is, raising a salesperson’s annual quota if he or she exceeded it the previous year, may also hurt long-term sales.
Ironically, sales people were paid by commission (or incentives) for centuries before economists began writing about the issue. Clearly since then the world has become more complex, organisations have grown and customers multiplied.
However, according to our survey results it appears that the age old principle of incentives and commissions still holds good.
Interestingly this chimes with studies such as Doug Chung’s How to Really Motivate Salespeople. One of the factors Chung looked at was personality types. He concluded that salespeople have ‘personality types’ characterised by a larger appetite for risk than other workers.
As a result, a pay plan that offers upside potential such as added incentives appeals to them. This is what 80 percent of British sales people told us.
Read more in our latest eBook: The Three Ways Incentives Fire Up Sales Teams