Sold by: Amazon. In this book, global sales management thought leaders Andy Zoltners, Prabha Sinha, and Sally Lorimer share actionable ideas for enhancing the power of any sales force. By organizing insights from blogs around a proven sales force system framework the authors created, the book can help sales leaders:. Skip to main content Andris A. Something went wrong. Please try your request again later.
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For more than three decades, Andris Zoltners, now an emeritus professor at Northwestern, has been studying the best ways to organize and pay salespeople. In this interview, he shares some of his insights with HBR. Companies make several common mistakes with sales compensation, Zoltners notes: over- or underincentivizing key products, setting quotas too high or too low, and underpaying top performers or overpaying people with good territories. Overly complicated plans are also a problem. Some plans have different payments for dozens of objectives.
Yet a bigger issue may be an overreliance on compensation in the first place, Zoltners suggests. There are other drivers of sales success—the people you hire, their managers, the design of territories. And while analytics are a useful tool, culture may prove to be an even better one. As a young business school professor, Andris Zoltners became fascinated by two questions: How many salespeople does a company need, and how should it divide up their territories to balance workload and market potential—so as to maximize profits?
He has coauthored six books on the subject; the latest, The Power of Sales Analytics, was published last summer. Here are some edited highlights of that conversation:. HBR: What are the most common mistakes companies make in compensating a sales force? Or companies set goals or quotas too low or too high. On the other hand, if the quotas are too high, people will give up and stop working. Companies have gotten better at quota setting over the past 30 years, partly because better data for measuring territory potential is available.
With analytics you can start to estimate the consequences of what will happen if you change a plan, rather than guessing. You can look not only at overall revenue but also at who gets helped and who gets hurt by changes. If your best performers will be hurt by a new plan, you want to know that before you implement it.
Do sales leaders rely too much on compensation as a motivator? So why do they do it? Some of them are entering new markets or introducing new products, and they need to focus the sales team on new opportunities. Strategic opportunities must be addressed. But the reality is that while there are various drivers of sales success—you can restructure the sales force, hire better reps, select different sales managers, offer more-effective coaching—many of them take a long time to have an effect.
And rest assured, the latter group will find out about it and argue for changes. Should different reps have different pay plans? The risk is that some salespeople will make the wrong choices and feel regret. The company also may pay out more than it needs to. Why do companies favor complexity?
That is a significant problem with many plans. This happens because multiple market managers need to gain sales force attention for their brands. IBM has a complex selling process and sells many complicated products and services. But its pay plan has three components, and you can describe it on one side of a business card. Has the quality or attitude of the people going into sales changed during your years in the field?
A sales force usually spans different generations with different job expectations. Millennials may want a higher quality of life and more meaning in their work. Baby Boomers want to ensure a comfortable retirement. Those in the middle may be working for financial security. A successful compensation plan needs to accommodate all those objectives. Should companies base pay on activities, like number of calls made, instead of on sales?
In most industries salespeople earn a good salary before the incentives kick in. That salary is paying for activity—for making the sales calls. Paying salespeople for performing the basic duties of the job is an abdication of management; the manager is supposed to ensure that those activities are done. There are at least two more reasons not to pay for activity. Second, tracking activity will motivate an increase in quantity but also trigger a decrease in quality. How big a problem is disintermediation, or the diminished role of salespeople in actually generating revenue?
We describe it using two concepts. Does an auto salesperson really cause you to buy a car, or is he just negotiating the discount and doing the paperwork, since you probably decided what to buy by reading websites before you walked into the showroom? The other is measurability—can you accurately measure the sales and profit generated by a single salesperson? For incentives to really work, you need to have individual causality and measurability, and in a lot of industries those are declining.
Is globalization changing the way companies pay their salespeople? Some global companies want to use the same sales compensation plan around the world. The tax systems are completely different—in Scandinavia, incentive payments are taxed much higher than salary is, so people there would be penalized by a high-incentive plan. China, India, and Latin America prefer higher-risk plans. I worry that some sales methods are too prescriptive—they want to come up with an approach you can use with every customer.
It might be better if the industry would focus more on what really drives sales success—broader issues like hiring and managing—instead of focusing on exactly what salespeople should say to close a deal. Why are field sales managers so important? Managing someone is never easy. Some people are responsive to criticism; others are defensive. Good managers empower their people to do the selling.
But the role is incredibly important. If you have a bad salesperson, it affects one territory. If you have a bad sales manager, it affects a whole district. The best sales leaders shape culture by modeling behavior and telling stories. I once had the vice president of sales for a defibrillator company speak to my class at Northwestern. He showed up looking really tired. That illustrated his commitment to listening to customers. Stories like that get around. Cultures are really about choices—the culture pushes you to do this or do that.
How well do tech start-ups manage their sales forces? Many of them need help. A lot of them hire leaders who are very smart people but who have very little selling experience. Fixing it later is very difficult to do well.
Some innovation experts point to salespeople as an important source of ideas. Do many companies really use them in that way? Is the number of salespeople going to decline because of technology and self-service? People have predicted that before, and they were wrong. The sales job will certainly change. Social media, e-mail, videoconferencing, and webinars are all ways that companies are connecting with customers and prospects. There will be more telesales and inside sales jobs, and more national account or key account jobs.
In many industries there may be less face-to-face selling. That will remain the role of the salesperson. In business, nothing happens until a sale is made, and most jobs involve some form of selling. Selling is about being curious and trying to help people. I had a knee replacement, and there was a sales guy in the operating room, making sure the doctor used the right components.
You manage through culture. You manage through managers. You manage by sizing, structuring, territory design, training, and hiring—there are many decisions that drive sales force effectiveness. We have to build a new paradigm. Follow him on Twitter danmcginn. The sales force analytics pioneer weighs in on compensation. View more from the April Issue Explore the Archive. Executive Summary For more than three decades, Andris Zoltners, now an emeritus professor at Northwestern, has been studying the best ways to organize and pay salespeople.
Here are some edited highlights of that conversation: HBR: What are the most common mistakes companies make in compensating a sales force? Brian Tietz.
Sales Feature Andris A. Lorimer A company needs enough to ensure that all key tasks get executed well. You manage through culture, through managers, through hiring. A version of this article appeared in the April issue pp. Related Topics:.
Getting Beyond “Show Me the Money”: An Interview with Andris Zoltners
Andris Zoltners founding dir. ZS Associates is a consulting and professional services firm focusing on consulting , software , and technology , headquartered in Evanston, Illinois that provides services for clients in private equity, healthcare, and technology. It provides Advisory, Technology, and Operations support to its clients. While at the University of Massachusetts, they conducted research together into the knapsack problem ,  a combinatorial optimization problem that is used to determine the number of items that fit in a collection so that the total weight of those items together is less than or equal to a given limit. They realized that their research could be applied not only to planning and distributing meals for astronauts and members of U. In its first three years, ZS had helped eight of the 10 largest pharmaceutical companies in the world, including Pfizer, align territories and resize their sales forces. By that time, the member team worked on or more projects in a dozen countries—including the United States, Canada and many European countries.