The failure of incentives is usually due to one of three conditions. The most common condition is a lack of the attributes required for sales success. When salespeople lack the attributes required for sales success, no amount of incentives will cause them to suddenly sell more effectively. A more likely outcome is that they will start to press harder to close sales and suffer a decline in sales performance.
If salespeople have the attributes required for sales success, the performance impact of incentives will vary based upon the weighting of selected attributes. For salespeople who are somewhat weak in the attributes of Sales Drive, Assertiveness, Energy, and Independence (i.e., they are externally motivated), an incentive program may indeed produce a spike in performance. However, for salespeople who are internally motivated, an incentive program may simply compensate them twice for doing what they would have done anyway.
A much more important issue for companies to consider when dealing with internally motivated salespeople is to ensure they don’t provide performance disincentives. The concept of a disincentive is best illustrated with an example.
Some years ago I had a lady friend whose husband worked for a large textile manufacturer. This textile manufacturer had a policy that capped salesperson earnings at 200 percent of their annual target. My friend’s husband was an exceptional salesperson, and in the second month of the fiscal year he closed the largest order in the company’s history. One undesirable outcome of this achievement was that he had maximized his earning potential for the year…with ten months remaining! He did not know what to do. Clearly he had little incentive to sell for those ten months. He went to his manager, and together they tried to convince the company to change its policy, but to no avail. This very successful salesperson ended up leaving the textile manufacturer and finding another (much more lucrative) sales job.
The moral of this story is that companies should identify and eliminate performance disincentives as the first step in developing an incentive plan. The second step should be analyzing the makeup of their sales staff. How many of the salespeople have the attributes required for sales success? How many are internally motivated versus externally motivated? An incentive program will have the most impact when a significant proportion of a company’s salespeople have the attributes required for sales success and they are externally motivated.