Game of the Week

In aggregate, U.S. companies alone spend more than $800 billion on incentive compensation each year. These same companies are spending three times more on incentive compensation than they spend on advertising. So naturally finance tries to ensure that comp plans have cost-control measures designed into them.

The finance organization, meanwhile, views the compensation plans as an expense to manage. That’s not surprising: Sales force compensation represents the single largest marketing investment for most B2B companies.

Stars seem to knock down any target that stands in their way—but may stop working if a ceiling is imposed. Laggards need more guidance and prodding to make their numbers (carrots as well as sticks, in many cases). Core performers fall somewhere in the middle; they get the least attention, even though they’re the group most likely to move the needle—if they’re given the proper incentives.

Studying Sales Compensation

Researchers studying sales compensation have long been guided by the principal-agent theory. This theory, drawn from the field of economics, describes the problem that results from conflicting interests between a principal (a company, for instance) and an agent hired by that principal (an employee). For example, a company wants an employee’s maximum output, but a salaried employee may be tempted to slack off and may be able to get away with it if the company can’t observe how hard the employee is working. Most incentive or variable pay schemes—including stock options for the C-suite—are attempts to align the interests of principals and agents. Commission-based plans for salespeople are just one example.

Advice about Setting Sales Compensation

Some of my advice would be straightforward: I would urge managers to remove the caps on commissions or, if they have to retain some ceiling for political reasons, to set it as high as possible. The research is clear on this point: Companies sell more when they eliminate thresholds at which salespeople’s marginal incentives are reduced. There might be problems if some reps’ earnings dramatically exceed their bosses’ or even rival a C-suite executive’s compensation, but the evidence shows that firms benefit when these arbitrary caps are removed.

According to bestselling author Dan Pink, sales has changed more in the last 10 years than the previous 100. Today, buyers have as much information as sellers—along with ample choices and the means to push back. Selling effectively requires a new approach.

In this interactive Harvard Business Review webinar, Dan Pink draws on cutting-edge social science and best practices from global organizations to reveal the new ABCs of selling. Pink reveals 5 ways to frame messages to increase clarity and promote action. He also discusses why problem finding is now more important than problem solving, how questioning your abilities before a sales call can actually help, and why the most effective salespeople are not extroverts.

1809, 2020

Top Ten Sales Leaders of 2020

By |September 18th, 2020|Categories: Gamification|

The internet is full of top ten sales leaders lists. Unfortunately, most of these aren't representative. They use metrics like number of followers and just list the people with the loudest mics. As a result, [...]

1109, 2020

Top 10 Sales Contest Ideas

By |September 11th, 2020|Categories: Gamification|

We've all heard the term “sales gamification” floating around the internet. Sales managers across the globe swear by it. They say it boosts sales motivation. And sure, there are obvious benefits to using positive reinforcement. [...]

By |2018-06-05T01:29:03+00:00August 19th, 2016|Boosting Sales, Gamification|Comments Off on Game of the Week

About the Author:

Matt Bullock
Serial entrepreneur who loves a deep dive into technology and applying it to solve business problems. Matt recognized that gamification of business activity processes would lead to greater staff engagement, increase productivity and motivate the team to do more, so that businesses sell more and grow more.