There’s a mismatch between what science knows and what business does.
As a matter of fact, social sciences have demonstrated for a long time that traditional incentives models, rewarding targets achievement, do not positively affect performances, especially in activities that require even rudimentary cognitive skills (The puzzle of motivation, D. Pink).
Nevertheless, we all know that in a business environment what does not get measured does not get done and, despite social sciences’ studies, companies continue to adopt traditional sales force effectiveness models, based on:
- Standard sales process focused on optimization of cost effectiveness per customer segment
- Incentive system which assigns individual reward based on quantitative targets achievement
Basically, traditional methods seem to be aimed to distribute rewards within the sales organization coherently with the contribution to the target achievement.
But do they have a real impact on sales performances?
Stimulated by this contradiction, we analyzed traditional incentives systems and identified four key limits:
- The result of a “vertical top-down push” approach of objectives setting totally depends on people understanding and engagement and can imply heterogeneity. Each salesman can understand and “live” sales targets differently from his colleagues
- Application of standard sales process can generate a feeling of reduced initiative and autonomy. Successes and failures cannot be clearly allocated (bad management decision or sales team faulty actions?) and no one feels responsible
- Traditional models based on “high bonus to top performers” do not tackle the majority of people who is in the comfort zone: salespeople who are very far from target achievement are not motivated to make effort on the field; salespeople who achieved the target could evaluate “safer” to postpone extra-sales to the next period
- Typical customer segmentation model inevitably implies estimation errors. There is an additional business potential still unexplored that can only be grasped through direct contact with the customer
Furthermore, we are experiencing a changing environment characterized by more complex products and services, multichannel communication and lower standardization level, which is pushing towards a more sophisticated customer engagement model and personalized sales approach, which is the context where social sciences show that traditional incentives methods do not work.
So, how to effectively mobilize sales organization to have a real impact on performances?
As science and practical experiences demonstrate, autonomous responsibility indeed drastically improve performance. That’s why roundabouts autonomous responsibility has progressively substituting traffic lights with an increase in fluidity and reduction of accidents. Sales effectiveness is thus not only a matter of efficiency, but it is significantly improved by autonomous responsibility.
We think that the focus should then be on:
- low-average performance sales people vs top performers
- business potential vs target achievement
- customers vs products
- trust, initiative and accountability vs central steering
- management by support vs management by control
- teams vs lone fighter success
How to do that?
We are experimenting a new model integrating traditional incentive systems with a competitive mechanism between peers based on the following elements:
- Teams – I win if we win: bonuses are assigned to teams not to individuals
- Points collection – My performance is measured by collected points: teams collect points for each sales activity and result (proper scoring system in place)
- Accountability – I’m responsible of my team ranking: salespeople have a certain autonomy in their sales activities (although the scoring system addresses their focus)
- Dynamicity – I’m always visible in the ranking, there are no “anonymity areas”: teams compete each other in small groups (like in football leagues) and each team can downgrade or upgrade to lower or upper leagues in each “season”
- Competition – I win on the basis of my team ranking: no more target achievement
A proper scoring system, in line with the company strategy and objectives, is therefore needed. It should be based on the “perfect sales process”, assigning different points to specific KPIs related to sales activities and results. It should be also considered a capacity factor to enable a fair competition among not-homogeneous teams.
Finally, it should be highlighted that this innovative model can be very useful in some regulated environments, such as banking and pharma sectors, where traditional incentive schemes based on sales target achievements are starting to face compliance issues.
First implementation of this new model had significant impact on sales performance, bringing fun and motivation in the sales organization.
For further information, please contact:
Angelo CENTRONE
a.centrone@eurogroupconsulting.it
Flavia GHISONI
f.ghisoni@eurogroupconsulting.it
