A study published in the Journal of Marketing (citation below) sheds light on how the way performance rankings are presented can significantly impact key outcomes like sales quota attainment and employee turnover.
Conducted by researchers from Vanderbilt University, San Diego State University, the University of Denver, and the University of Georgia, this research focuses on how various types of performance rankings influence salespeople.
The research team, led by Molly Ahearne, Mohsen Pourmasoudi, Yashar Atefi, and Son K. Lam, sought to answer some fundamental questions:
- Do performance rankings encourage salespeople to improve?
- Does the type of information shared with the rankings matter?
- What effect do these rankings have on long-term factors such as turnover?
Growing Importance of Sales Performance Management
Sales performance management (SPM) tools have become a significant area of investment for U.S. companies, with expenditures expected to rise from $3.6 billion annually to $6.4 billion by 2030.
Among these tools, the practice of publishing sales rankings is widespread. Companies believe that by showing salespeople how they stack up against their peers, they will spur them to perform better.
Yet, until now, there has been limited research to back up the effectiveness of performance rankings. This study fills that gap by examining data from over 27,000 salespeople across 170 firms in 83 countries.
The researchers explored three types of rankings: anonymized rankings, identifiable rankings, and rankings that also included quotas.
Key Findings
The study found that performance rankings do indeed motivate salespeople, but the results vary depending on the format used.
Anonymized rankings can boost quota attainment, as salespeople are driven by a desire to improve their standing. However, the downside is a higher turnover rate.
The study explains that while anonymized rankings push salespeople to perform better, they may also cause frustration or disillusionment, leading to higher employee turnover.
In contrast, rankings that include identifiable peers have the strongest positive effect. Salespeople are not only motivated to improve but also feel a social pressure to maintain their reputation among colleagues.
This combination of self-improvement and peer pressure leads to better performance and lower turnover rates. However, adding quotas to these rankings does not seem to offer any additional performance benefits.
Implications for Managers
For sales managers and leadership teams, this study offers several insights. First, more data is not always better.
Rather than overwhelming salespeople with a wide array of metrics, companies should focus on presenting the right information in a clear, strategic way. Identifiable rankings seem to offer the best results, motivating salespeople to improve while fostering a sense of transparency and trust.
Managers should also avoid including quotas in performance rankings, as the study suggests this does not lead to better outcomes. Instead, focusing on relative performance can provide a more effective motivational tool for sales teams.
By implementing performance dashboards that align with these findings, companies can enhance salesperson motivation, improve performance, and reduce turnover. This approach offers a more sustainable way to manage and support a high-performing sales force, driving both short-term and long-term success.
The information for this article was sourced from the American Marketing Association.
Citation
Ahearne, M., Pourmasoudi, M., Atefi, Y., & Lam, S. K. (2024). Sales Performance Rankings: Examining the Impact of the Type of Information Displayed on Sales Force Outcomes. Journal of Marketing, 0(0). https://doi.org/10.1177/00222429241264191