Pay More to Get Less? Why Traditional Sales Incentives Fail in Com- plex Environments
Type
working paper
Date Issued
2024
Author(s)
Abstract
Companies’ new solution-based selling approaches raise questions about salespeople’s compensation. Although individual-based pay for performance has traditionally been considered a very strong motivator for salespeople, its functionality is doubted. This study emphasizes the need to reconsider individual-based pay for performance in the emerging context of solution selling in different ways. Using primary and secondary data, and analyzing them with linear regression and descriptive analysis techniques, we found that individual-based pay for performance is not only unfavorable because of the crowding-out effect but also be- cause it negatively impacts salespeople’s performance drivers (e.g., team collaboration, job satisfaction, or work engagement). Furthermore, it is not compatible with other sales management controls and work environments that foster intrinsic motivation (i.e., behavior capability control and psychological safety). These findings are consistent across different cultural regions. Finally, we provide evidence that individual-based pay for performance is financially unviable.
Language
English (United States)
Keywords
pay for performance
motivation
sales
crowding-out effect
solution selling