The overwhelming majority of companies use individual, revenue-based incentive plans as part of their compensation package for front-line sales staff. For as long as there have been salespeople, commission served as the perfect motivational lever which kept them productive and happy—it could even make them quite rich if they got good enough at it. But now it’s time to re-evaluate this strategy given the recent changes in business-to-business buying behavior.
Strategic buyers are no longer dependent on salespeople for information on product and service offerings. In the information age, business leaders can consult review sites, online forums, social media, and professional networks to discover solutions for their needs. In fact, at CEB (now Gartner), our Sales and Marketing practice found that the typical B2B buyer is 57 percent of the way through their decision-making process before engaging with a supplier. The cold call isn’t dead, but it is no longer the most prudent way to introduce your product to potential customers.
As such, it has become harder to measure the value a salesperson has provided after a purchase is made. Previously, companies would arm their field teams with standard marketing materials and wait for the money to come in. Sales reps would cultivate leads, provide potential customers with all of the relevant information, and convert some of those opportunities into deals. The salesperson’s contribution was very clear: They were revenue generators. Today, now that customers wait until they know exactly what they want and how much they want to pay for it before reaching out to salespeople, B2B providers are getting their name out through some combination of PR, content marketing, social media, white papers, and the like. The best companies are doing it in a way that draws prospective customers into the funnel, recognizing the need for more institutional support in the sales and lead generation process.
At the Harvard Business Review last week, Andris A. Zoltners, PK Sinha, and Sally E. Lorimer noted these changes, pointing out how digital channels have reduced the traditional sales role and arguing that current incentive plans are less effective than before as a result. The authors, prominent leaders at global consulting firm ZS Associates, suggest changing incentive metrics from individual to team- and company-based performance and shifting the pay ratio more towards salary rather than commission. They also recommended new team structures to accommodate customers’ different channel preferences and adding more diverse skill sets, such as social media prowess, to sales teams.
The early results of the CEB Total Rewards Leadership Council’s ongoing sales compensation benchmarking initiative are also pointing toward a shift in incentive design after finding that average performance against goals is declining. With goal attainment lower than ever before, intent to stay and willingness to collaborate have gone down, while the likelihood of engaging in unethical behavior has gone up.
Daniel Pink’s 2011 book Drive studies the truth behind what motivates people, with the main theme being that any approach to managing productivity that relies on dangling rewards above employees’ heads is doomed to fail given the evolving needs of the modern workforce. Today’s workers are more interested in fulfillment and autonomy than pursuit of the almighty dollar. This even held true in sales, where he profiled a large tech company that had done away with individual incentive plans in favor of a team-based approach with remarkable results. Following the removal of the individually competitive environment, collaboration increased significantly, as did total revenue.
Rather than a sales manager overseeing a team of reps with evenly divided territory, modern sales teams need to be free-standing commercial engines. They need to be present where their customers are having discovery and purchasing conversations, to be comfortable communicating across a variety of channels, and crafting customized messaging for the increasing number of stakeholders in strategic purchasing decisions. The skills and composition needed for successful sales teams has already changed; it’s time for incentive plans to catch up.