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Incentive Systems are the Wrong Way to Manage Salespeople

Many sales managers and business executives are mistakenly hung up on the notion that  the only way to get salespeople to perform at a high level and that is to put them on an incentive or commission system. Recently, Wells Fargo was involved in a scandal where its sales employees opened 2.1 million bank accounts without their customers knowing about it just to make their incentive numbers. According to an article by Rachel Feintzeig, which appeared in The Wall Street Journal, Wells Fargo is changing its sales incentive system, but it’s still going to continue to use one. As new CEO Timothy J. Sloan put it, “We want to arm our team members with the right incentives.” Mr. Sloan added that he is very concerned about the “risk of overcorrecting” from the previous system that cost the bank $185 million in fines. It seems that Mr. Sloan is still convinced that an incentive system is the way to go. This could result in his sharing the same fate as his predecessor. 

Ross Reck’s Take…

The problem is that incentive systems don’t work; they only look like they do. According to Ms. Feintzeig, “While incentives such as commissions spur salespeople to close deals and sell more products, they can also provoke infighting among employees and lead some to find ways around the system for their own gain….” Incentive systems also encourage salespeople to sell customers things they don’t want or need which turns them off. I recently witnessed a Wells Fargo customer losing his cool and screaming at a teller who had just tried to cross-sell him a product he didn’t want. This is not good for business. On the other hand, engaged salespeople don’t need incentives to get them excited about performing at a high level. They do so because they are excited about what they’re doing, feel good about their company’s products and services and strongly believe in what their company stands for. Engaging employees is a far more cost-effective way to get them to perform at a high level and it results in no unintended consequences.

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