An interesting HBR Blog article by Andris A. Zoltners, PK Sinha, and Sally E. Lorimer asserts companies are addicted to harmful sales incentive cultures. Incentives aren’t the problem. The problem is determining whether or not the incentives drive behavior that is “healthy” for the company.
“Eat what you kill” models align with short-term growth but often come at the expense of long-term growth and stability. The largest risk with highly leveraged compensation plans is that they often cause the customer to suffer for a company’s short-term thinking. These plans cause behavior that over-commits, disappoints, and causes rifts with customers which eventually harms the company. To combat this impact many companies adopt hybrid approaches where one team hunts and another farms.
It would be easy to blame over-aggressive salespeople for customer dissatisfaction. But the problem lies with management. Incentives drive behaviors and engagement. Focusing compensation too heavily on revenue increases the top line but it comes at an extreme cost. Instead… reward:
- Long-term growth AND short-term growth
- Customer satisfaction
- Retention and renewal
- Selling more to existing customers
Wall Street rewards top line growth… for a time. Eventually, various functional teams must be aligned to achieve profitable growth. Otherwise, you’ll have sold your company short. The pivot point is to ask if top-line growth is more important than loyal and profitable customers? Such short-term thinking may result in favorable initial results if it bolsters top-line growth. Later your company suffers. How long can you afford to buy revenue?