This 9 minute video by Dan Pink, author of DRiVE, is a humorous and enlightening white board presentation on how the same incentives can be either effective or ineffective depending on the circumstances. I know a number of sales managers who would be surprised to learn that highly leveraged comp plans are contraindicated for sales roles that require creative thinking, but that’s the science. Most folks want to think of themselves as “outside of the box” creative and certainly in the enterprise software selling environment, creativity is highly valued. Does this mean that your best field reps should not be given the potential to earn the big bucks?
Common ground on this concept would more likely be found regarding inside sales resources where scripts and rigor around sales process are more typical. The scientific evidence discussed in the video would suggest that these plan participants ought to be highly leveraged with significant upside for over quota performance. The same might be said for some of the work performed by pre-sales consultants whose product demonstrations can branch into features and functionality deemed interesting to prospects but not deviating from the overall product capabilities. And some sales managers might rationalize that account managers (aka: farmers) could have less leverage since they are operating with a relatively known revenue stream.
But when it comes to the “hunter” role, conventional wisdom might dictate they should be on a highly leveraged plan (50/50) to motivate them to perform the myriad of complex activities it takes to find, develop and close a new customer. In Pink’s book, outlined in this video, the evidence shows optimal performance for people whose jobs require creativity is best achieved by non-cash rewards. Concepts such as autonomy, mastery and purpose are proven to be highly effective in motivating creative types.
More recently the book Primed to Perform: How to Build the Highest Performing Cultures Through the Science of Total Motivation by Lindsay McGregor and Neel Doshi, looked at how other motivating factors affect incentive compensation. They assert that if someone is working just for the commission the money is not as motivating as if they sincerely believe in what they are selling, then commissions amplify one of the primary motivators, purpose.
If you’re in competition for experienced enterprise software sales people you have to maintain the highly leveraged comp plans they demand. However, you can optimize their motivation by creating a culture of purpose (supported by effective products) that truly solve your customer’s problems. The purpose could be in the form of the rep’s contribution to disrupting an industry or a value proposition that is both significant and true.
Of course, if you function in a narrow market niche and your products are significantly customized for each deployment which requires creative account leadership then a reevaluation of their compensation leverage is probably warranted. That would look like very similar OTE with leverage in the form of a bonus for achieving certain goals.