By Andrew Kent
The Major League Baseball All-Star Game is upon us, which means my Fantasy Baseball team gets a few days off—and my mouse-clicking finger gets some much-needed rest. Turns out, this wonkish fantasy “sport” has a lot to teach us about compensating a sales force.
For the uninitiated, the goal of Fantasy Baseball is to assemble a team of players that will maximize performance across a range of statistics. Traditionally, Fantasy Baseball leagues track five key statistics each for batters and pitchers.
But some fantasy league managers like to achieve a more granular view of a player’s performance. Just check out this league I’m in this year – it tracks 12 stats per player:
Now somebody please tell me: with all those statistical categories and numbers on the screen, how am I supposed to decide how valuable a player is to my team? Maybe a player gets a lot of RBIs, runs, and home runs, but how many doubles and triples should I sacrifice? It’s overwhelming—and in fact, research suggests that our brains cannot process more than 3-5 variables when making a decision.
But while the Fantasy Baseball example seems obvious, many of us do the same thing to our sales reps with overly complicated compensation plans. In the same way that measuring baseball players on too many statistics cripples my fantasy team decision-making ability, including too many metrics in the comp plan makes it impossible for reps to figure out what they’re being paid to do.
Sales is all about balance, both in time-spend and decision-making. Reps have a lot of different things they can do with their time—making calls, researching customers, servicing accounts, attending training, forecasting, etc.—and often need help finding the right balance between them. Similarly, sales reps’ decisions are all about tradeoffs: maintaining pricing discipline means lower volume; making more calls means lower call quality; more effort selling Product A means less effort on Product B.
But the comp plan is not the right place for optimizing behavior, whether in time spend or decision-making—compensation is a motivator, not a manager. That is, use incentives to push reps in the right direction, not to balance them between two extremes.
We often assume that we can engineer behavior through incentives. Humans certainly do respond to incentives, but a prerequisite to responding in the right way is that we understand how the incentives work—and the human brain is not a computer. The more we try to micromanage behavior through compensation, the more we find ourselves tinkering with comp plans until we end up with monstrosities like the company with 72 different comp plans with 30 metrics each.
And that’s just like my fantasy baseball team—staring at a dashboard of stats with no idea which ones are most important.
SEC Members, check out our Compensation Topic Center to see more of our work on comp plans and incentives.