Which type of bonus best motivates salespeople – an unconditional reward, a conditional bonus based on meeting performance goals, or a conditional bonus in the form of being punitive by withholding or even taking away bonuses if goals are not met?
For the sales force of an Indian manufacturer of durable goods, conditional bonuses work better than unconditional – but contrary to what their management had predicted, punitive damages did not yield better results, according to a randomized field experiment by Harvard University researchers, Doug J. Chung and Das Narayandas.
"Our results have implications for companies trying to more effectively manage their salespeople," the two write in a Harvard Business Review report on their experiment, "What's the Right Kind of Bonus to Motivate Your Sales Force?"
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