New research suggests that one of sales managers’ most time-honored motivational tools — the leaderboard — may be doing more harm than good.
Heresy, I know.
While fostering competition among co-workers has fallen into disfavor as a management tool in recent years (witness the backlash against rank-and-yank policies at GE, Microsoft and elsewhere), sales has always been seen as the exception. After all, competition is built into the DNA of sales: The marketplace is tough. Every win is someone else’s loss. And sales managers need to cultivate an atmosphere that keeps reps hungry and focused on winning. If some reps can’t handle the heat, well, they probably don’t belong in sales anyway.
But along comes this study — from the Wharton School, no less — that looked at 1,500 salespeople and what happens when they’re publicly compared to colleagues. These salespeople sold furniture, and it’s hard to imagine a more competitive environment. Consumers can visit lots of showrooms to buy furniture. Or they can shop on the Internet. There’s little in the way of competitive advantage from one sofa to another; success mostly depends on whether the salesperson can outsell the showroom down the street or Web sites that may well offer identical products for less.
11 percent gap
In the experiment, the salespeople were divided into two groups. In the first group, salespeople were told where their sales ranked compared with colleagues. In the second group, they were shown their individual results, but not how they compared with others. Researchers followed the groups for three years.
Sales performance of the second group — the ones who weren’t ranked against their colleagues — was 11 percent higher than that of the first group.
A closer look at the data showed an especially interesting pattern. In both groups, the top performers did equally well. In other words, internal competition didn’t make them better salespeople. That makes sense: They’re already at the top of their game, so how much better could they get?
The biggest differences came among the reps who were lower on the leaderboard. Here, relatively low rankings didn’t motivate them to do better. It motivated them to give up. The gap between them and top performers demoralized them, and their performance declined.
So let’s review: In this study, public rankings had little or no effect on top performers, and negative effects on average and low performers.
Of course, it’s only one study, and managing the performance of sales reps is enormously complex. I don’t see a wave of organizations taking down their leaderboards. And some sales managers, I suspect, would be okay with demotivating low-performing reps, if it led to them leaving and creating openings for more talented people. But this study is a good reminder that sales cultures are complex, and sometimes we end up getting results that are the opposite of what we intended.
Source: Barankay, I. (2015; under revision). Rank incentives: Evidence from a randomized workplace experiment. Reported in The New York Times: Why employee ranking can backfire (July 11, 2015).
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