Breaking the Sales Force Incentive Addiction: A Balanced Approach to Sales Force Effectiveness

Abstract

Dating back more than a century, companies have used incentives such as commissions and bonuses to motivate and direct the activities of salespeople. Today, sales force incentives comprise a large portion of sales force pay (approximately 40 percent on average for U.S. companies), almost all of which is linked to each individual salesperson’s short-term performance using metrics such as quarterly sales. Yet as selling becomes increasingly complex, motivating the right sales force behaviors using these traditional large short-term individual (LSTI) incentives becomes more challenging. Based on observation of various sales organizations, we suggest two propositions about the use of LSTI incentives in sales forces today. First, these incentives can create undesired consequences, including organizationally unproductive shortterm focus among salespeople that leads to a counterproductive culture and hurts company performance. Second, other sales force effectiveness (SFE) drivers are frequently more powerful than incentives for setting the right tone for the sales force, affecting sales force behaviors, and enhancing performance—especially when products and markets are complex. These propositions suggest that sales leaders should break their addiction to sales force incentives and develop a more balanced approach to motivating and controlling sales force effort using other SFE drivers in addition to LSTI incentives. By organizing a research agenda around a holistic Sales Force System framework, researchers can provide insights on the appropriate role for incentives, thereby helping sales leaders create and maintain more effective sales organizations.