Throughout my career in consulting and technology, I could always count on one spoken line from a customer, “we are unique.” This would often be followed by, “our industry is different.” And in truth, they are correct. It is easy to enumerate the differences between any two industries, or even two companies in the same industry.
However, when it comes to a successfully run sales organization, there are some universal truths that extend regardless of whether you are selling cars, insurance, software, holiday packages, or services. And, given our current climate, I’d argue that these universal ideas hold true whether you are working from your office or your kitchen table:
- You need clear goals for your sales team, and those goals have to result in personal income. Extrinsic motivation theory shows that if you want someone to do something, you need to make it worth their while.
- You need achievable goals for your sales team, and you need to convince them that the opportunity for them is real. Too many companies put little to zero thought into the sales team quota aside from “10% more than last year.” Worse, they then assign the same incentive plan regardless of the rep’s tenure or territory. Just ask the academics:
“… a firm choosing a salary + commission salesforce compensation scheme typically sets the same commission rate for every sales-agent on its payroll, in spite of the fact that exploring the heterogeneity and setting an agent-specific commission may create theoretically better incentives at the individual level. While reasons are varied, full or partial uniformity of this sort is well documented to be a ubiquitous feature of real-world salesforce compensation.”
- You need territories that the team can sell into. Even if you have a 100% insides sales team, handing someone accounts that stretch across multiple time zones is going to be a challenge. If the team is visiting accounts, you need to consider “windshield time” as well – how long it takes to travel to each potential or current client. Right now, many of you are 100% remote and travel time is not an issue. But for “essential” industries, client visits are still a reality.
- You need Sales Managers whose goals are in line with both their team and the company. This is a cross-industry challenge, as research looking at over 200 companies across multiple vertical markets has shown that manager decisions are made heavily influenced by their own personal goals.
“Sales managers on a quota’s cusp have a unique personal incentive to retain and lower quotas for poor-performing subordinates, allowing one to isolate a manager’s interest from the firm’s. 13%–15% of both quota adjustments and retention among poor performers are explained by managers’ incentives around quotas.”
None of these are unique to any given industry. Clear goals, quotas and incentives that reflect the real opportunity, and a territory that they can effectively pursue are all needed – along with a manager who works for both the reps and the company.
Homogenous Contracts for Heterogeneous Agents: Aligning Salesforce Composition and Compensation
Oystein Daljord, Stanford Graduate School of Business
Sanjog Misra, University of Rochester – Simon Business School
Harikesh Nair, Stanford University – Graduate School of Business
Do Agents Game Their Agents’ Behavior? Evidence from Sales Managers
Author(s): Alan Benson
Source: Journal of Labor Economics,
Vol. 33, No. 4 (October 2015), pp. 863-890