In 2009, business author Daniel Pink shook the world of motivation by suggesting that financial sales incentives should be eliminated for all roles requiring cognitive thinking, including sales roles, which, in aggregate, average 40% of their pay in financial incentives. The basic premise was that extrinsic incentives don’t help with the completion of complicated, cognitive tasks. In fact, they hurt performance. Pink advocated for intrinsic incentives only, such as autonomy, mastery and purpose.
This idea caused sales compensation plans to come under fire and sparked a conversation within companies about disbanding their sales incentive programs. As a CEO, you may have been part of these conversations. But before you consider moving to a comp plan devoid of sales incentives, consider the following research that shows why that might not be a wise decision.
Both sides of the “intrinsic vs. extrinsic” incentive debate can find individual studies that support their argument. Also, there are literally hundreds of studies available about motivation. A more productive literature review looks at meta-studies—essentially ‘studies of studies’—to show what all of the research says in aggregate.
One meta-analysis done by Uco Wiersma compared the impact on motivation when there were intrinsic incentives, extrinsic incentives, or both. The analysis showed that intrinsic and extrinsic incentives were actually additive. In other words, the value of the extrinsic motivation combined with intrinsic motivation was higher than the value of either motivator separately.
Another meta-analysis done by Nina Jenkins and Douglas Gupta from the University of Arkansas showed that while financial incentives clearly had a positive impact on the quantity of the work being done, they did not negatively impact the quality of the work. This is counter to Pink’s argument that adding financial incentives for cognitive tasks will actually reduce the quality of the outcome.
Finally, a meta-analysis done by Steve J. Condly, Richard E. Clark and Harold D. Stolovitch confirmed that the existence of financial incentives had a positive effect on the ultimate outcome for cognitive tasks. Across all studies, the existence of financial incentives showed a 22% gain in the end result for cognitive work tasks.
In addition, short-term (less than one month) incentives only had a 20% impact across all studies, whereas long-term incentives (more than six months) impacted performance by more than twice as much (44%). The studies in Pink’s book (and elsewhere) are very short-term, measured mostly in minutes or hours. Sales incentives, however, are almost universally long-term (mostly a full year) and, at a minimum, are classified as medium-term (one to six months).
What can we take from all of the academic literature? That financial incentives improve effort and results. They don’t hinder the quality of the work being done. The future of sales motivation is an optimal combination of intrinsic and extrinsic incentives. It isn’t an “either-or” proposition, but a “both-and.” Being excellent in both is the only way to maximize the motivation of the sales force and the results they produce. Focusing solely on intrinsic incentives at the expense of extrinsic incentives could result in an unwanted “pendulum swing” in compensation that will cause you to lose top performers who can make more money elsewhere.
Chad Albrecht is a principal at ZS in Chicago and is a leader in the firm’s sales compensation practice area. He and ZS principal Steve Marley are the authors of The Future of Sales Compensation (ZS; 2016).
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1:00 - 5:00 pm
Over 70% of Executives Surveyed Agree: Many Strategic Planning Efforts Lack Systematic Approach Tips for Enhancing Your Strategic Planning Process
Executives expressed frustration with their current strategic planning process. Issues include:
Steve Rutan and Denise Harrison have put together an afternoon workshop that will provide the tools you need to address these concerns. They have worked with hundreds of executives to develop a systematic approach that will enable your team to make better decisions during strategic planning. Steve and Denise will walk you through exercises for prioritizing your lists and steps that will reset and reinvigorate your process. This will be a hands-on workshop that will enable you to think about your business as you use the tools that are being presented. If you are ready for a Strategic Planning tune-up, select this workshop in your registration form. The additional fee of $695 will be added to your total.
2:00 - 5:00 pm
Female leaders face the same issues all leaders do, but they often face additional challenges too. In this peer session, we will facilitate a discussion of best practices and how to overcome common barriers to help women leaders be more effective within and outside their organizations.
Limited space available.
10:30 - 5:00 pm
General’s Retreat at Hermitage Golf Course
Sponsored by UBS
General’s Retreat, built in 1986 with architect Gary Roger Baird, has been voted the “Best Golf Course in Nashville” and is a “must play” when visiting the Nashville, Tennessee area. With the beautiful setting along the Cumberland River, golfers of all capabilities will thoroughly enjoy the golf, scenery and hospitality.
The golf outing fee includes transportation to and from the hotel, greens/cart fees, use of practice facilities, and boxed lunch. The bus will leave the hotel at 10:30 am for a noon shotgun start and return to the hotel after the cocktail reception following the completion of the round.
