Richard Bistrong: If you want performance, stop paying for it

In the February 23 edition of the Harvard Business Review, two professors from the London Business School argue that “performance-based pay can actually have dangerous outcomes for companies that implement it.” 

The authors — Dan Cable and Freek Vermeulen — advocate abolishing pay-for-performance not just for the C-suite but for other senior executives and managers too.

“Fixating on performance can weaken it,” Cable and Vermuelen argue.

That sounds wrong, especially to a former sales guy. And the authors acknowledge that “the goal of most executive plans is to focus on leaders hitting goals and achieving outcomes.”

But research shows the opposite: That “if you want great performance, performance is the wrong goal to fixate on.”

The right goal to prioritize, the authors say, is learning. When learning is emphasized, salespeople outperformed their peers who had a performance-oriented mindset.

The question, then, is why would a sales person need to master learning (outside product knowledge) in order succeed? Or as a former boss of mine would probably have said, “Less learning, more selling.”

Well, the HBR authors cite studies showing that “performance or outcome goals can have a deleterious effect on performance.” On the other hand, learners who think about change when strategizing outcomes and who consider new “strategies and processes to attain the desired results” typically outperformed their “hit the numbers” colleagues in the important performance categories.

Can we understand why?

Because in today’s international sales environment, field personnel are expected to develop the business and execute plans, while also being subject-matter experts for all sorts of compliance issues. That’s a daunting task. In lucrative frontier markets at the crossroads of corruption and commerce, the pressures multiply and sometimes overwhelm.

In these conditions, Cable and Vermuelen say,  the need to “master a new situation” and “acquire a new set of skills” are the most valued and critical attributes. Without them, a sales team won’t be able to succeed professionally, financially, ethically, and legally.

For compliance and business-development professionals, this means spending lots of time with sales teams and treating them not just as sales people but as learners. It means making sure compliance is more than sitting through training sessions and signing off on attendance sheets.

It’s about treating sales teams not as part of the problem but as part of the solution — as compliance ambassadors, as I referred to them in an earlier post.

Compliance and goal setting should be about brainstorming with a mix of business and compliance leaders, where challenges are tossed into the conversation, and everyone pitches in to create a plan for success. When that happens, everyone learns. Performance then becomes more than meeting the next sales target. It’s about long-term sustainable success.

The question remains: Are you paying for that?

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Richard Bistrong is a contributing editor of the FCPA Blog and CEO of Front-Line Anti-Bribery LLC. He was named one of Ethisphere’s 100 Most Influential in Business Ethics for 2015. He consults, writes and speaks about compliance issues. He can be contacted here and on twitter @richardbistrong.