For decades the difficulty of motivating salespeople has been frustrating sales and marketing managers. To the most effective ones, two things are clear: one, the job is difficult; two, there is no one simple solution. Believing that “good salespeople are born, not made,” many managers recognize that recruiting is important. Others holding that “if you pay for performance, you’ll get it” believe that incentive compensation produces motivation. The more successful sales executives recognize that motivation is largely a result of a combination of effective recruiting practices, sensible pay plans, and good management. What else may be involved has been an open question. Previous studies on employee motivation clearly demonstrate that a variety of factors (rewards, supervision, goals, and so forth) shape and guide how well people work.1 From a sales manager’s point of view, then, two questions are paramount: 1. Which factors have the most influence on motivation of salespeople? 2. What are the implications for management action and decision making? To answer the first question, we recently conducted a study to determine how much a person’s personality and incentive pay determine level of motivation. Then, because we believed from prior experience that task clarity, another variable, has a pronounced effect on salesperson motivation, we included it in our study as well. Finally, we looked at the impact of good management. (We describe the methodology in the accompanying sidebar.) In our research of the motivating factors, we used multiple measures such as structural questionnaires, open-ended interviews, and field visits with sales representatives. These were designed to gather information on the relationships among the independent variables—design of the sales pay plan, quality of supervision, nature of the selling task—and the dependent variables, motivation and performance. We used four measures to assess motivation and performance. The first was actual hours per week spent selling and in sales-related activities. The second was hours spent in the evening or on weekends in job-related activities. The third was the percent increase or decrease in units sold and revenues compared to the same period the previous year. The fourth and last measure was the strength of the sales representative’s expectations.† This article uses the first measure (hours spent per week selling or in sales-related activities) to assess levels of motivation. The first and second measures correlate highly at the .91 level and are therefore interchangeable. We could not report on the revenue increases or decreases because of confidentiality agreements. Also revenue increases and decreases were the result of other factors such as changes in the economy and in marketing programs. Our primary purpose was to measure salesperson motivation and effort as precisely and accurately as possible. We believe that the time a salesperson spends on selling and sales-related activities is a clear and precise measure of motivation. The final form of the questionnaire contained a total of 68 questions. Most of the key variables were measured by at least two items. In an effort to establish reliability, we administered a retest to a number of sales representatives from a service organization. Using a three-week time spread between the first and second test, we then examined the pairs of questionnaires, and the reliability coefficient indicated no significant variation. We also spent three consecutive days each calling on diverse customers with two sales representatives from each of the four participating companies. Authors’ note: The questionnaire was designed and produced with help from a number of different sources, including: (1) Survey Research Center, Institute for Social Research, University of Michigan; (2) Edwards Personal Preference Schedule; (3) Internal-External (I-E) Scale*; and (4) Jay W. Lorsch and John J. Morse, Organizations & Their Members: A Contingency Approach (New York: Harper & Row, 1974), methodological appendix. * See J.B. Rotter, “Generalized Expectancies for Internal Versus External Control of Reinforcement,” Psychological Monographs, 1966, vol. 80, (1), p. 1. † R.L. Oliver, “Expectancy Theory Predictions of Salesmen’s Performance,” Journal of Marketing Research, August 1974, p. 243. In our research, we conducted in-depth interviews with salespeople and their managers, analyzed a questionnaire filled out by more than 200 salespeople in four different organizations, and observed some actual sales calls. The four participating companies provide a broad sampling of current sales management practices. Two of the companies sell business products and two sell transportation services; all four are industry leaders. Of the business products companies, one manufactures and sells minicomputers; the other, office equipment. The transportation companies specialize in air freight serving domestic and international markets. One transportation services company and one business products company pay sales-people a straight salary. The other two companies use incentive plans. Our results are clear. The most important determinants of motivation are (1) the nature of the task, (2) the personality, particularly the strength of the salesperson’s need for achievement, and (3) the type of compensation plan. Unfortunately, our measurement of the fourth determinant, the quality of management, is not precise enough for us to say any more than that field supervision is important. We believe, however, that if a company’s management is not far outside the normal range in quality, its effect on motivation is below that of task clarity and salesperson personality. Exhibit I shows the four factors ranked in order of their importance. (The ranking is a result of a statistical analysis that measured independently each factor’s ability to motivate salespeople.)2  Exhibit I The four motivating factors in order of importance* *The ability to motivate is expressed by the variation explained by each factor. Note: Data in all exhibits represent averages. Before discussing in more detail the impact each variable has on motivation and performance, we’d like to describe more fully exactly why motivating salespeople is such an enormous problem. Understanding the salesperson’s role is key. Salespeople vary greatly in what they do as well as what they are expected to do.3 Some, alone and unsupervised, sell simple products such as books and magazines door to door. Others, working as a team, sell complex technical products such as power plants and aircraft. For some salespeople the eventual purchase of their product is far removed from their “sale.” For example, when detail people who do missionary selling of pharmaceutical drugs leave the physician’s office, it is difficult for anyone, perhaps even the physician, to know if a sale was made. Only through a postaudit of prescriptions is it possible to identify the outcome. The salespeople we are concerned with here are full-time professionals who generally sell to business and industry, not to consumers. We believe, however, that our findings are generally applicable even to part-time salespeople selling door to door. The salesperson we are interested in:
(If four companies are vying for a particular order, three salespeople will be turned down and, in a sense, personally rejected.)
(At times it is difficult for the salesperson to identify the “antagonist.” Sometimes it is a purchasing agent or an executive in the buying company, and sometimes it seems to be the shipping manager in the salesperson’s own company.) It is no wonder that salespeople are difficult to motivate. Now let’s take a closer look at the four factors necessary for a motivated sales system, and then we’ll explore the implications for action. A Clear Sales TaskObviously, the nature of selling differs from one company to another. For example, a pharmaceutical detail person calling on physicians has a very different job from an account executive selling apparel or an account manager selling materials-handling systems. We can categorize what people do in vastly different sales jobs according to how clear their tasks are. Task clarity is the degree to which there is a clear and positive relationship between exerting effort and attaining results. In sales, this characteristic varies from one selling job to another, depending on two major conditions: (1) the time span of performance feedback and (2) the degree that one can accurately determine the individual results of salespeople. Our research shows that these components of task clarity can be accurately determined. In the participating companies, the selling jobs displayed strong differences, which are outlined in Exhibit II. Exhibit II Task clarity of sales job in four companies We determined the conditions of the sales tasks in the four companies from the comments of managers and our own assessments, which correspond, furthermore, to the individual assessments of the sales-people. For example, a salesperson in a business products company with a clear task comments: “It is quite easy to describe our job. We go by the numbers; in fact, we have numbers for everything. Our performance goals are very clear. Also on Friday afternoon we get a printout that gives feedback on our results. It is very easy to see the relationship between my effort and results. My territory stays the same for a year; I get frequent updates about new orders and reorders. In fact, I just told some trainees that attaining sales goals is not difficult as long as they plan and are willing to exert some effort.” A transportation services salesperson with an unclear task describes her job much differently: “Sure we get credited sales reports, but they are only 50% to 60% accurate. The accounting office has admitted that they have trouble crediting revenue to the person who produced it. Even though I understand their problem, it makes it tough on us in terms of accurately pinpointing what we produce. The truth is that our objective measures, such as shipment counts, are not accurate at the district level. I guess you could say no one really knows how well his or her territory is doing at any given time.” This salesperson’s district sales manager supported her comments. He stated that field sales reports are inaccurate because of the difficulty in crediting the revenue from millions of shipments, averaging less than $50 per shipment, to the salesperson involved in the sale. For example, each week a large manufacturer of microprocessors located in the Santa Clara Valley of California ships and receives hundreds of air freight parcels to customers all over the United States. The sale—the manufacturer’s decision to use air freight as well as a specific air transportation company—may have been made in the Santa Clara Valley or in various destination cities. The individual salesperson, therefore, has no way of knowing whether the revenue increases in his or her territory were caused by a colleague in a distant city. As a result regional and district revenue reports do not reflect individuals’ efforts. Also, because of the nature of the sales task, fewer than 7% of the sales calls generate new business. The most tangible evidence of new business is an oral or written commitment on the part of the shipper to use the services of the company at some future time. Our study shows that the clarity of the sales task is strongly related to on-the-job performance and effort. Motivation and effort in the clear sales task of the two business products organizations are substantially greater than in the relatively unclear sales task of the transportation services companies (see A in Exhibit III). If a sales task is unclear, selling can be frustrating. In such a situation, the salesperson will not know where he or she stands and will not be able to pinpoint the results of his or her own efforts. Good performance seems to be a random occurrence in no way related to effort. This lack of connection is discouraging and dampens the pride that might otherwise come from accomplishment. Exhibit III Relation of effort to task clarity and personality* *See the ruled insert for an explanatioin of the variable used. People Who Need to AchieveManagers know intuitively that personality differences are an important determinant of on-the-job performance, and a number of studies confirm their feelings.4 Our study was aimed at finding out how differences in need for achievement, as described by David McClelland, influence the motivation of sales representatives.5 McClelland has characterized the person with a high need to achieve as one who likes to take responsibility for solving problems, sets moderate achievement goals, takes calculated risks, desires feedback on performance, and is likely to find selling rewarding and challenging. We found that the degree of a person’s need for achievement is directly related to sales force motivation (see B in Exhibit III). As need for achievement increases, so do effort and motivation. In fact, as a group, the motivation of those with higher achievement needs is 13% greater than those with lower needs. The total group of 204 salespeople scored relatively high on need for achievement. There are two probable explanations for this. First, as McClelland states, people who have a high need for achievement tend to gravitate toward sales jobs. Second, the participating companies’ selection and hiring processes use multiple interviews and emphasize a record of past accomplishments that could show a high need to achieve. (Implicitly, all the companies were trying to recruit people with a high need to achieve.) A regional sales manager in one of the business products companies comments: “Our motivational plan is built around goals, evaluation, and hiring the right people. It is not unusual for an applicant to visit our office six or seven times before a hiring decision is made. I want to get to know each person as thoroughly as possible before I make a commitment. During these interviews I look for a strong record of accomplishment [in school, business, or social settings] and indications that the applicant is very results oriented.” Compensation Plan DesignIn 1953, Harry Tosdal wrote that “a large portion of sales managers seem dissatisfied with their present compensation plans…unfortunately, there is no nice or easy solution.”6 The problem of designing effective sales compensation programs has not been solved since Tosdal’s observation 27 years ago. A recent Research Institute of America (RIA) study indicates that 24% of all responding companies had redesigned their sales pay plans during the past 2 years—the same percentage of change as had been reported in its 1971 survey.7 The 1975 RIA study comments that “companies do considerable milling about and searching for the combination that will give them the best results.” Designing an effective sales compensation program, however, is a complex management assignment. All the sales executives we talked to expressed concern about whether plans would increase immediate sales and, if so, whether they would sacrifice the development of long-term accounts. Other areas of concern were equitable pay, how a plan should be communicated, and what percent of total take-home pay should be a fixed base. They also worried about whether incentive plans would interfere with the introduction of new product lines and strategy changes and, finally, whether money or status is the real motivator. We couldn’t attempt to answer all these pragmatic and challenging questions and focused only on identifying whether incentive compensation would be a more effective motivator for salespeople than straight salary. Straight salary is a fixed, agreed-on amount of gross pay that does not vary from week to week during a definite period of time. With an incentive compensation plan all or a certain percentage of a salesperson’s income varies in relation to that individual’s performance. Much has been written about the design of sales pay programs.8 According to Tosdal, the two most widely used compensation designs—straight salary and commission—both offer definite advantages.9 Straight salary provides security and reduces employees’ worries about fluctuations in take-home pay. It is also simple in design and administration and avoids questions of parity in pay across different functions in the same company. On the other hand, commissions provide a powerful incentive. Studies conducted in 1953 by Tosdal and in 1975 by RIA show that most managers favor some form of incentive compensation: Although sales managers make strikingly similar choices of plans, they continue to search for the “right” compensation plan just as they did in the early 1950s. A senior vice president of one company participating in our study comments: “The board of directors asked me to develop a financial package for the managers of a recently acquired subsidiary. Our consultants showed us a number of complex incentive plans, but the basic question I have is whether the extra dollars invested in incentive pay will result in return on investment in terms of motivation. If not, we should forget about all the incentive pay plans and use straight salary. But the interesting question is on what basis do we decide to go straight salary or incentive.” Our findings demonstrate:
Exhibit IV shows that sales representatives in the business products and transportation services companies that paid on incentive had only slightly higher levels of motivation than sales representatives in the other two companies studied that paid on straight salary. Exhibit IV How Design of Compensation Plan as well as Incentive Plan, Combined with Tasks of Different Clarity, Relate to Effort The true power of incentive pay surfaces when we take into account the nature of the sales task. In the business products organization where the sales task is clear, incentive pay has a much larger motivational impact than the incentive program in the transportation services company where the sales task is unclear. Sales representatives’ comments support our analysis. A salesperson in the transportation company with the incentive plan states: “None of us, including the manager, believes in the commission. It’s more of a game than a science. All of us like the extra dollars, but in terms of motivation, the bonus has little impact.” The comments of a salesperson paid on incentive in the business equipment industry are different: “There is no doubt in my mind that our company’s incentive and recognition systems have a big influence on motivation. I used to earn about $15,000; this year I will hit $25,000 to $30,000. I feel proud about this, and I like being able to have a chance to make a good dollar. I am in control of my own destiny.” Compare this statement with the comments of another sales representative who is paid a straight salary in the other business equipment company: “Our management needs to rethink its philosophy of sales compensation. It really bothers me that I don’t get paid for results. In my territory, sales are up 64% over last year. The sales manager says I am doing a good job, but it’s not reflected in my take-home pay. Maybe it’s one of the reasons that in this office the people don’t make too many sales calls.” Two implications stem from these findings. First, the design and implementation of a sales incentive system is time consuming and costly. If the sales task is unclear, the ability of an incentive to motivate is significantly diminished, which suggests that a straight salary would be more practical and less problematic. Second, sales pay must not be seen as an isolated variable but as part of a system. In this system, on-the-job performance is influenced not only by the design of the pay plan but also by characteristics of the sales task and the personality of the salespeople. How these factors in combination influence the ability of pay to serve as a source of motivation is shown in Exhibit V. Our overall findings and comparative rankings are shown in Exhibit VI. Exhibit V How incentive plan, in combination with personality and task clarity, affects effort Exhibit VI Overall findings for task clarity, and compensation in relation to effort Quality of ManagementIn recruiting and training their sales representatives, managers spend a lot of money—a good deal of which is often wasted due to ineffective sales supervision. Furthermore, because the salesperson’s role can be especially frustrating, the first-line sales supervisor’s role has additional importance. But little is known about what constitutes effective supervision in a sales setting.10 In fact, most contemporary articles on sales management merely describe current fads and trends. Because of this lack, we aimed a segment of our study at identifying what sales supervisors can do to contribute to the good performance of their subordinates. We identified the following skills as contributing toward effective leadership. Although the list is tentative, we include it because of the importance of first-line supervision and the “systems” nature of our findings:
A Sales Management SystemWith our results in mind, we suggest managers adopt a multifunctional approach to achieve the greatest possible improvement in sales performance.11 Managers need to stress the positive effects of task design, personality, and compensation—in that order. To design such a plan, managers should assess the current level of each variable, how much each variable would have to be modified to bring it up to the maximum realizable goals, and the costs associated with that degree of modification of each factor. John Roche, manager of marketing training and development at Emery Air Freight, applied such a framework in 1976. Before then each Emery salesperson was assigned a territory with hundreds of accounts. The process of selecting accounts for sales calls was understandably vague and difficult. As a result, many calls resulted in dead ends with a comparable high ratio of failure to success. The clouds hanging over the sales representatives’ success were compounded by two problems with measurement: 1. Because it took from three to five months for feedback on sales to reach them, salespeople—who need to know how they are doing from day to day—could not get a psychologically meaningful picture of their performance. 2. Even when they did, it was often impossible to determine whether they or the salespeople on the other end should get credit for the sale. A senior vice president and general manager of Emery described it this way: “Every day we move thousands of shipments to customers all over the world. We don’t really know which sales representative closed the sale. For example, a city like New York…there are hundreds of shipments in and out of there every day which the New York sales force may have had nothing to do with. Perhaps it was our sales rep or a truck driver in Kansas City who is generating business into New York. We have come to the conclusion that we cannot equitably measure a salesperson in terms of revenue or shipment counts because no one really knows who is responsible for closing the sale on 50% of the shipments that move across our docks.” The high risk of failure, large account load, and imprecise feedback considerably decreased the scope in which a salesperson could take effective individual action—the key feature of the selling task. On a scale of 1 to 10 (with 10 high and 1 low) salespeople rated their individual control over their sales results at just above 3. In applying its systems approach, Emery management first authorized a redesign of the sales task in three offices and an evaluation of the impact on sales performance. The design included:
Feedback & measurement—A computer-based information system was designed to provide timely updates to salespeople on their weekly performance in relation to their targets.
This design improved the marketing capability of the sales force and also allowed the achievement-oriented salespeople to function at greater potential. In other words, the job was structured toward a higher probability that the salespeople would be able to measure and control their own success or failure. The results of the job redesign in the three offices of Emery are impressive, in terms of both the sales-peoples’ sense of successful control over their task and their improved sales. The salespeoples’ rating of their individual control over results climbed from an initial low of 3.2 to a consistent 8.9. In terms of shipments, the three offices moved to among the top producers in their respective regions, increasing shipments an average of 34.7% from 1978 to 1979 (see Exhibit VII). Exhibit VII Percent increase in number of shipments in three Emery offices during the previous year* *Shipments were used instead of revenues to control for inflation. Also there were no significance pricing or service changes in the test sites. The initial results and the sales force’s acceptance of the job redesign led James J. Brown, senior vice president and general manager, to redesign the sales task throughout the company. Brown said that: “In addition to increasing the motivation and productivity of the sales force, we find a positive by-product is the availability to management of timely and accurate information. It helps us forecast, staff, respond to customers’ needs and competitors’ actions, and direct the sales force toward specific prospects in profitable, growing industries.” Success: A Sum of the PartsAlthough we have identified four factors that both individually and in combination have a large impact on salesperson motivation, it is not clear why they work together the way they do. We believe, however, that task clarity, personality, compensation plan, and quality of management are important because of the relationships expressed in the following chart: 1. Clear tasks ensure that the linkage between the effort expended and the actual sales results is good and tight. Task clarity also makes it easier to measure and report sales results accurately and makes a good measurement system possible. 2.Need for achievement makes good salespeople. They thrive in a system in which the effort they expend clearly relates to results. 3. Incentive compensation makes a strong link between reward (and often recognition) and expended effort (through reported actual sales results). 4. Good management ensures accurate reporting of actual sales results, equitable rewards for reported sales results, and valuable recognition of these results. Rewards and recognition motivate the salesperson to increase the effort expended. Willingness to do the work is only part of generating good sales results, however; salespeople must also be able to do the work. Thus good training, both in a center and in the field, is necessary to enable salespeople to accomplish their goals. Such a comprehensive sales system will generate a capable, motivated, and successful sales force—with rewards for both the individual salesperson and the company. 1. For a good summary of the area, see Orville C. Walker, Jr., Gilbert A. Churchill, and Neil M. Ford, “Motivation and Performance in Industrial Selling: Present Knowledge and Needed Research,” Journal of Marketing Research, vol. XIV, May 1977, p. 156. 2. N.H. Nie, C.H. Hull, J.G. Jenkins, K. Steinbrenner, and D.H. Kent, Statistical Package for the Social Sciences, 2nd ed. (New York: McGraw-Hill, 1975), p. 404. 3. See, for example, Gilbert A. Churchill, Neil M. Ford, and Orville C. Walker, Jr., “Organizational Climate and Job Satisfaction in the Sales Force,” Journal of Marketing Research, vol. XIII, November 1976, p. 323. 4. David Mayer and Herbert M. Greenberg, “What Makes a Good Salesman,” HBR July–August 1964, p. 119; E.E. Ghiselli, The Validity of Occupational Aptitude Tests (New York: John Wiley, 1966); and David C. McClelland, The Achieving Society (Princeton, N.J.: Van Nostrand, 1961). 5. David C. McClelland, “Business Drive and National Achievement,” HBR July–August 1962, p. 99. 6. Harry R. Tosdal, “How to Design the Salesman’s Compensation Plan,” HBR September–October 1953, p. 61. 7. “Sales Compensation” (Mount Kisco, N.Y.: Research Institute of America, 1975). 8. John P. Steinbrink, “How to Pay Your Sales Force,” HBR July–August 1978, p. III; and Richard C. Smyth, “Financial Incentives for Salesmen,” HBR January–February 1968, p. 109. 9. Tosdal, “Salesman’s Compensation Plan,” HBR. 10. Walker, Gilbert, and Ford, “Motivation and Performance in Industrial Selling,” p. 157. 11. Gene W. Dalton and Paul R. Lawrence, Motivation and Control in Organizations (Homewood, Ill.: Richard D. Irwin, 1971), p. 291. A version of this article appeared in the July 1980 issue of Harvard Business Review. What is a straight salary compensation plan?Straight-Salary Plan. The straight salary is the simplest compensation plan. Under it, salespersons receive fixed sums are regular intervals (usually each week or month but sometimes every two weeks), representing total payments for their services.
What is the advantage of a straight salary compensation plan?Straight salary can make all sales people equal members, which is best when they're working as part of a team or a small group and when everyone contributes equally to the sales goals. It can help you attract new talent with the promise of consistent pay, no matter how they perform.
Which of the following is a disadvantage of a straight salary?Disadvantages of Straight Salary Method
It does not provide any incentive for hard work. So, it does not encourage salesmen to do hard work.
Under what conditions is a straight commission compensation plan most appropriate?Straight commission compensation is most appropriate for companies that require its sales force to engage in missionary selling.
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Which of the following statements about a straight salary compensation plan is true?
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