Fair Incentives

Channel sales programs have a fairness problem. 

Salespeople are not playing on a level playing field. Some people work in major hubs and others spread-out rural areas. Some people have decades of experience and a deep rolodex, while others are just starting their careers. Yet, in many programs, everyone is chasing the same goals.

Fairness might feel like a small issue, but it can have a big impact on sales performance. Salespeople will mentally check out if they do not feel like the best rewards are achievable or if others are getting better rewards for less effort. This is hard-wired into our brains.

The best way to build a fair program is to have participants compete against reasonable cohorts. Often, companies have approached this issue by creating groups based on last year’s sales volume. That approach does not fix the fairness issue, it just changes who feels slighted. Salespeople who have great years feel like they get punished by making the game harder.

Instead, the best approach to fair cohorts is to group participants using variables that affect performance but they have no control over. For example, size of their region — both in terms of population and square mileage — are major factors for the success of a salesperson, but that person can’t change the population of Denver.

Tenure is another good variable for fair cohorts. Let people with less than 24 months on the job compete with other rookies rather than against 25-year veterans with huge books of business.

This is why designing great programs has a big data science component. Using data to create fair cohorts and achievable-but-challenging goals is the key to unlocking a motivating program.