According to HubSpot, sales agent turnover is 35%, three times higher than other departments. However, sales organizations continue with static sales compensation programs focusing more on incentives than salaries. In his 2011 book “Drive,” Daniel Pink indicated, “there is a mismatch between what science knows and what business does,” where companies attempt to drive behavior with extrinsic rewards rather than intrinsic motivation. However, as Pink indicated, scientific research is vast on the benefits of autonomous motivation versus controlled motivation.
Autonomous motivation is the type of motivation that comes from within an individual rather than being externally driven by rewards or incentives. According to self-determination theory, people motivated autonomously are more likely to be engaged, persistent and successful in their endeavors. Sales agents can benefit from autonomous motivation, as it can help them stay focused and engaged in their work, even when faced with challenges or setbacks. However, traditional sales compensation models often rely heavily on incentives, such as commissions or bonuses, which can undermine autonomous motivation.
The Importance of Purpose
Research utilizing sales operational data (Kuvaas et al., 2016; Conde, Prybutok, and Thompson, 2020, 2021, 2022) provide multiple reasons why companies should consider sales compensation less dependent on incentives and instead focuses on higher salaries. Incentives can undermine autonomous motivation. According to self-determination theory (Deci et al., 2017), people are more likely to be motivated and engaged when they can pursue activities that are meaningful and aligned with their values. When incentives are the primary driver of motivation, people may lose sight of the meaning and purpose behind their work, which can lead to disengagement and reduced performance.
Conde, Prybutok and Thompson (2021) found a negative relationship between top sales incentive earners and their tenure and job satisfaction. Consider a sales agent motivated solely by the prospect of earning a high commission. They may be more likely to focus on closing deals at all costs rather than building long-term relationships with customers or considering the company’s needs. This short-term focus can ultimately affect the company’s success, negatively impacting the sales agent.
On the other hand, a sales agent motivated by a sense of purpose and meaning in their work is more likely to be engaged and persistent, even when faced with challenges or setbacks. They may be more likely to build strong, long-term relationships with customers and consider the company’s needs in their sales approach. This type of autonomous motivation can lead to better results in the long run.
Incentives can create a short-term focus. Many sales incentives are designed to encourage short-term results, such as meeting quotas or closing deals. While this can be effective in the short term, it can also create a focus on immediate rewards rather than long-term success. This can lead to a lack of strategic thinking and a focus on quick wins rather than building sustainable, long-term customer relationships (Cerasoli et al., 2014).
Higher Salaries Drive Loyalty
In contrast, Gagne and Forrest (2008) found that higher salaries can create a longer-term focus. When sales agents feel fairly compensated for their work, they may be more likely to think strategically about the needs of the company and the long-term success of their sales efforts. This can lead to a more sustainable approach to sales, focusing on building long-term relationships with customers and considering the company’s needs. Higher salaries can lead to increased job satisfaction and retention. According to Kuvaas et al. (2016), job satisfaction and retention are often related to salary. When sales agents feel fairly compensated for their work, they are more likely to be satisfied with their jobs and less likely to leave. This can lead to increased stability and long-term success for the company.
According to Conde and Prybutok (2020), sales agent turnover costs companies over $35,000 as it takes time and resources to hire and train new hires. As well as considering lost sales opportunities. By offering higher salaries to sales agents, companies can encourage greater job satisfaction and retention, ultimately leading to greater stability and success.
Higher salaries can lead to increased performance. Kuvaas et al. (2016) have shown that higher salaries can increase productivity, retention and performance. People are more likely to be engaged and motivated when they feel fairly compensated for their work. Studies have found that higher base pay fosters better performance and affective commitment, and this outcome can be explained through higher autonomous motivation. Gagne and Forrest (2008) state that higher base pay signals the recognition of high competence and the validation of the employee-employer relationship. Companies can encourage greater productivity and better results by providing higher salaries to sales agents.
It is time for sales organizations to follow the science of updating compensation systems focused on incentives but ultimately limit sales agent tenure, job satisfaction and performance.
Cerasoli, C. P., Nicklin, J. M., & Ford, M. T. (2014). Intrinsic motivation and extrinsic incentives jointly predict performance: a 40-year meta-analysis. Psychological bulletin, 140(4), 980.
Conde, R., & Prybutok, V. (2020). Inside sales agent’s sales activities influence on work outcomes and sales agent tenure through autonomous motivation. Journal of Business & Industrial Marketing.
Conde, R., Prybutok, V., & Thompson, K. (2021). A new perspective on sales outcome controls: an inside sales perspective. European Journal of Marketing.
Conde, R., Prybutok, V., & Thompson, K. (2022). The moderating role of cultural controls on the relationship between traditional formal sales controls and inside salesperson performance. Journal of Business & Industrial Marketing, (ahead-of-print).
Deci, E. L., Olafsen, A. H., & Ryan, R. M. (2017). Self-determination theory in work organizations: The state of a science. Annual review of organizational psychology and organizational behavior, 4, 19-43.
Gagné, M., & Forest, J. (2008). The study of compensation systems through the lens of self-determination theory: Reconciling 35 years of debate (Vol. 49, No. 3, p. 225). Educational Publishing Foundation.
Kuvaas, B., Buch, R., Gagne, M., Dysvik, A., & Forest, J. (2016). Do you get what you pay for? Sales incentives and implications for motivation and changes in turnover intention and work effort. Motivation and Emotion, 40(5), 667-680.