Are Sales Bonuses Really as Motivating as You Might Think?
A client that is planning to expand their call handling team asked me about the right balance of remuneration for new starters. How much of a sales person’s package should be base, and how much should be commission or sales incentives? The answer might surprise you.
In this excellent RSA video, Dan Pink shares the surprising truth about what actually motivates us.
The reason why monetary motivators do not work
In his talk, he debunks the conventional wisdom that if you reward something you get more of the behaviour you want, and if you punish something you get less of it.
Studies demonstrate that the conventional carrot and stick approach works for mechanical tasks (higher pay the higher the performance), but it doesn’t work for complex tasks (even rudimentary cognitive skill – a larger reward led to lower performance).
Sales is not a simple or straightforward task. When the task gets more complicated. When it requires conception and creative thinking, monetary motivators won’t work.
So what motivates people then? I wrote about this topic here, if you’re interested. In a nutshell, autonomy, mastery, and purpose motivates us, and it motivates not only more, but in better ways than money does.
The best use of money as a motivator is to pay people enough to take money off the table. They need to stop thinking about money, and focus on the work.
Potential problems caused by money
A 2010 study by Princeton University concluded that a person’s happiness was optimal when they received an income of around $75,000 (around £46,000). People earning less than this figure were more likely to be unhappy, but when people made over this amount of money, their happiness was unaffected.
Economist, Angus Deaton, who commissioned the study, hypothesises that this figure seems to be the amount at which money ceases to be an issue – people will have enough money to pay their expenses and indulge in sufficient treats and entertainment without worry. The high earners may enjoy a more luxurious life but this does not result in them being any happier.
This report by Deloitte also highlights some of the potential problems associated with big bonuses. These issues include the risk that bonuses can promote short-term thinking and excessive risk taking; the possibility of valuable employees leaving if bonuses aren’t paid; and the fact that many people are more interested in their work/life balance than having lots of money, While written with the finance industry in mind, these issues apply to sales bonuses in any sector.
The real motivators
Financial incentives may work to motivate employees in some situations but in many cases a more balanced approach is better. Justin Moore, founder and CEO of Axcient, claims that his employees are more motivated by a well-run metrics program than cash bonuses.
However you choose to reward your staff for good performance, the issue always comes back to customer service and employee engagement. Rather than bribing your employees to make more sales, consider what you can do to make them really engaged and motivated to do well at their job. The best salespeople are not only good at what they do – they also truly love their career and believe in what they do.