FAQs on “sales incentive free” organization
A couple of days ago, I posted about our organization’s decision to be a “sales incentive free” organization. You can read the post here. I got many questions (Q) and comments (C on the post mainly via LinkedIn comments section and direct messages. Here’s a compilation of the questions and my answers (A).
Q/C: “I personally believe that the top performers or aspirational sales folks will always be motivated to hit a big number if they see some gratification. For the rest it’s just on paper.”
Q/C: “What will make the sales guys exceed the targets? — appraisals? Let’s not forget there is a lag between the two.”
A: Agreed. It’s just that we don’t want or expect our sales reps to exceed targets or “hit a big number” or “hit the ball out of the park”. This will have implications on us. If ambitious means someone who wants a carrot to earn 20–30% more income every month, we are unlikely to attract such “ambitious” sales reps. And we are fine with it. About gratification for overachievement, we plan to recognize the sales rep in the same month rather than dole out a sales-based cash reward.
Q/C: “Salespeople without incentives is like placing a Honda city engine inside a Lamborghini.”
Q/C: “I have personally believed sales performers are hunters and it is the gratification to hit that big number that makes them motivated.”
A: I don’t exactly know what these comments are alluding to. But I do know that they carry a contrary point of view. To understand our point of view, it will be worthwhile reading up Dan Pink’s book “Drive: The surprising truth about what motivates us”.
Q/C: “It sounds similar to 360° Performance Appraisals. Given that you no longer have to stress over targets, it may reduce stress and bring good culture to the company throughout the year.”
A: Yes the approach is similar to 360 degree Performance Appraisals, though not exactly the same. However, we do have sales targets — we just don’t have a “if-then” formula for sales-based incentives attached to it. It may still cause stress. But not because the sales rep is going to make less money this month. About “culture”, we’re still trying to understand what that word means. Having said that, we are trying to build an environment where Type I people will thrive better than Type X people.
Q/C: “I can certainly say for every sales folks, incentives are like motivation. But implementing this on larger workforce may create serval consequences as well.”
A: Oh yes of course. It will have consequences. Our point is — which consequence are you more comfortable living with? We usually ask ourselves this question while taking any decision.
Q/C: “A problem with this approach we faced was with a few people who kept expecting fixed increments every year despite lacklustre performance, so we are also moving to rating based system now.”
A: That’s great. In any case, we rarely overhaul our system design for edge cases.
I expected most of these questions. These questions come from our traditional belief systems and motivation theories we may have learnt. However, there seems to be a gap between what science knows and what business does. We are trying to close that gap.
To understand this better, and if you are inclined to get into the science of it, we’d recommend that you start off by understanding the most popular theories of motivation.
