Why salespeople sandbag forecasts

I’m always perplexed when I hear about sales people and their motivation. I have a job that comes with job requirements and annual performance reviews. And I like to think that my motivations usually line up with those of the company. If I do my job well, the company benefits. If the company does well, I should (eventually) benefit as well.

But sales people are apparently a different breed. If you don’t tune their compensation exactly right, they might go off and do something that benefits them at the expense of the company. As reported by Scientific American, a scientist at HP has been recruiting volunteers to act as sales people, and running experiments to try to determine the best way to boost sales or handle competing resellers.

The experiment simulates interactions between sales agents and sales managers. […] Through a little computer-mediated back-and-forth with their managers, most agents wise up to the fact that this game rewards sales but offers no incentive to tell managers anything. Similar compensation schemes in the real world explain why salespeople tend to sandbag their forecasts, making it hard for their companies to plan ahead.

He’s already had some success. He was able to evaluate a new compensation plan that HP was considering, and determine that it would encourage sales people to push some products while causing total sales to suffer.

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