Tell the average line manager that sales people are ‘coin-operated’ and you are likely to get a wry but knowing smile. It is a common assumption that if you stop paying the sales force commission, they will stop selling.
But this assumption is wrong, according to Daniel Pink, business writer and author of the recently published Drive: the surprising truth about what motivates us, who was the opening keynote speaker at WorldAtWork’s Total Rewards 2011 conference in San Diego. Of course, reward professionals probably know this error in thinking all too well – but how often do frontline line managers, who frequently still set sales targets and commissions, fall into this trap?
To get his point across, Pink cited the example of Red Gate, a medium-sized software organisation based in Cambridge, UK, that had a sales force paid by commission. It had the, not uncommon, situation of some staff “gaming the sales compensation system” and when any adjustments were introduced to reduce these ‘manipulations’, the sales people simply upped their game to beat the new system.
Eventually Neil Davidson, chief executive officer of Red Gate, decided to eliminate commissions and instead increase basic salaries and use an annual profit share. He said: “Our [previous] sales salary system felt like a gigantic, complex and medieval spirograph centred on an assumption that was not true.”
That assumption was: sales staff are coin-operated.
Long story short: changing the pay strategy at Red Gate led to increased customer satisfaction, increased staff motivation and increased profits.
Pink warns that sales people use money as feedback because they are not given enough verbal feedback. For many, the only verbal feedback they get is the annual performance review.
“Good sales people are feedback freaks,” said Pink. “They are not coin-operated.”
Question for reward managers: Do the line managers at your organisation know this simple but obvious observation?
Read more blogs from WorldAtWork’s Total Rewards 2011 conference in San Diego