How to Really Motivate Salespeople: New Research challenges Conventional Wisdom About the Best Ways to Pay Your Team

Research shows that firms' sales increase when commission caps are removed. Raising a salesperson's quota after a successful year decreases motivation. Instead, a pay system that features multiple components, e.g. a variety of commissions and bonuses, can engage a wider range of sales representatives. Steps for the sales compensation plan: establish the pay level; balance incentives and salary; design the metrics, plan type, and payout curve; select payout periods; and evaluate additional elements. Firms use analytics and experiments to improve marketing, pricing, and web site design; since sales are a significant expense and a key revenue driver, these processes should also be used to identify more effective ways to motivate salespeople.