Do Performance Rankings Actually Motivate Salespeople?

U.S. firms spend an estimated $3.6 billion annually on sales performance management (SPM) practices and tools. This figure is expected to rise to $6.4 billion by 2030, underscoring the growing importance of SPM practices within organizations.

One of the most commonly used SPM practices involves companies publishing the sales performance rankings of their salespeople on key performance metrics. The goal of publishing performance rankings is to provide feedback to all salespeople by disclosing their performance relative to their peers, thereby creating a competitive motive for performance improvement. However, despite widespread use, the effectiveness of these rankings has not been explored.

In a new Journal of Marketing study, we examine how the presentation of performance rankings influences critical outcomes, including salesperson quota attainment and employee turnover.

Questions around Performance Rankings

Our research poses four primary questions:

1. Do performance rankings effectively motivate salespeople to improve their performance?
2. Does this effectiveness vary by the type of information published alongside the ranking?
3. What are the conditions under which publishing certain information with performance rankings is more or less effective?
4. What are the long-term implications of performance rankings on salesperson turnover?

Our research team conducted two studies involving over 27,000 salespeople from more than 170 firms across 83 countries. These studies leveraged extensive field data to examine the effects of three distinct information conditions: anonymized performance rankings, identifiable performance rankings, and identifiable rankings with quotas.

Our findings reveal that while performance rankings can positively influence sales outcomes, their effectiveness—and, by extension, the value derived from the performance ranking dashboard—hinges significantly on the type of information disclosed within the dashboards.

While performance rankings can positively influence sales outcomes, their effectiveness—and, by extension, the value derived from the performance ranking dashboard—hinges significantly on the type of information disclosed within the dashboards.

For instance, anonymized rankings effectively motivate salespeople to increase their quota attainment, yet they also lead to higher turnover rates, which can result in substantial indirect costs related to recruitment, training, and loss of organizational knowledge. As a result, the costs associated with implementing and maintaining anonymized ranking systems may not be justified by the outcomes unless turnover can be effectively managed.

In contrast, identifiable performance rankings have the most substantial positive impact across our two studies, significantly enhancing quota attainment and reducing turnover. Our findings indicate that when salespeople know the identities of their peers in the rankings, they are motivated not only to improve their performance but also to maintain a positive social image. This dual motivation of self-improvement and self-presentation drives better performance and lowers turnover rates. However, when quotas are disclosed alongside identities and performance rankings, we fail to see performance enhancing benefits.

Lessons for Chief Marketing Officers

Our study offers valuable lessons for managers and salespeople:

• More information is not always better. Instead, the strategic selection and combination of performance data are crucial for achieving both immediate and enduring positive outcomes.

• Managers should develop and implement identifiable ranking systems, ensuring transparency in how rankings are determined and communicated.

• Managers should avoid including fixed or objective performance metrics (i.e., quotas) in ranking systems to focus on relative performance evaluations, which is essential for the effectiveness of these systems.

Implementing these recommendations can drive essential behavioral changes among sales managers and executive leadership within sales organizations. Sales managers will be able to adopt a more strategic approach to performance ranking disclosures, emphasizing transparency and leveraging the motivational benefits of identifiable rankings, which should lead to improvements in quota attainment and reduced turnover within their teams.

Furthermore, executive leaders can invest in performance ranking dashboards that are tailored to their organization’s unique characteristics, taking into account their sales force’s compensation structure and size. By doing so, they can ensure the investment in performance dashboards will justify the costs by achieving substantial performance gains and minimizing turnover, thereby enhancing the overall effectiveness of the sales force.

Our research highlights the critical role of transparency and information type in performance rankings. By implementing performance rankings and carefully selecting the information disclosed alongside them, they can create a more motivated and loyal sales force. This approach will not only drive better performance outcomes but also contribute to a more sustainable organizational culture.

We urge scholars to build on our research and explore rankings on team goals and how they interact with individual salesperson rankings. Furthermore, it is important to study factors such as familiarity and social interactions between salespeople, office proximity and location, physical versus virtual contact between peers, and the extent of knowledge sharing. Future studies can also expand our understanding of how performance rankings may differ in effectiveness depending on the motivational orientation of salespeople.

Source: Molly Ahearne, Mohsen Pourmasoudi, Yashar Atefi, and Son K. Lam, “Sales Performance Rankings: Examining the Impact of the Type of Information Displayed on Sales Force Outcomes,” Journal of Marketing.

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