As a young business school professor, Andris Zoltners became fascinated by two questions: How many salespeople does a company need, and how should it divide up their territories to balance workload and market potential—so as to maximize profits? To unearth the answers, he developed and applied complex math models, and in 1983 Zoltners, by then a professor at Northwestern University’s Kellogg School, had enough companies clamoring for his insights that he and a colleague, Prabha Sinha, founded ZS Associates. Today the firm is one of the world’s largest sales consultancies, with 3,500 employees, and Zoltners, now emeritus after 35 years on Northwestern’s faculty, is considered an authority on the best ways to manage and pay a sales force. He has coauthored six books on the subject; the latest, The Power of Sales Analytics, was published last summer. Zoltners recently spoke to HBR’s Daniel McGinn about why companies rely too heavily on compensation systems to drive results, why field managers are the key to a high-performing sales force, and what’s changed over the years he’s spent watching the field. Here are some edited highlights of that conversation:
Getting Beyond “Show Me the Money”: An Interview with Andris Zoltners
For more than three decades, Andris Zoltners, now an emeritus professor at Northwestern, has been studying the best ways to organize and pay salespeople. The pioneer of sales analytics, he is the founder of one of the world’s largest sales consulting firms and the author of six books on sales management. In this interview, he shares some of his insights with HBR.
Companies make several common mistakes with sales compensation, Zoltners notes: over- or underincentivizing key products, setting quotas too high or too low, and underpaying top performers or overpaying people with good territories. Companies often get the proportion of incentive pay wrong, too, because they fail to account for “free sales”—residual sales they get nearly automatically. They may think they’re paying 60% in salary and 40% in commissions, but if their salespeople have a lot of free sales, commissions could be closer to 15%. Overly complicated plans are also a problem. Some plans have different payments for dozens of objectives. That’s too much; salespeople can focus on only four or five goals at most.
Yet a bigger issue may be an overreliance on compensation in the first place, Zoltners suggests. There are other drivers of sales success—the people you hire, their managers, the design of territories. And while analytics are a useful tool, culture may prove to be an even better one.
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