Today, more office workers collaborate in teams on complex tasks requiring cooperation and creativity. That makes it harder to judge exactly who is hurting or helping performance, yet bonuses have persisted. “It’s very hard to step out of that tradition,” says Professor Klaus Moller of Switzerland’s University of St Gallen. “It needs a leap of faith.”
Moller co-authored a study of salespeople at the Lichtenstein-based Hilti group, a family-owned company that sells construction products and services in 120 countries and wanted advice on reforming its pay-for-performance schemes.
In early 2019, 190 Hilti salespeople in eastern Europe were switched from a salary that was 65 per cent fixed and 35 per cent dependent on meeting performance targets to an almost entirely fixed salary. (Small, non-monetary rewards such as family dinner vouchers were paid to teams that won internal company competitions for their performance.)
The results were impressive: The country group outperformed the market by a factor of 1.4 in 2019, double the rate of 2018. Staff turnover fell by more than 4 per cent and satisfaction with pay rose by 19 per cent, double the company-wide increase. Crucially, sales efforts did not drop off.
The new system had obvious advantages over the older one, which was so complex it was hard to understand exactly how it worked and bred unhelpful habits: Staff would rush to close sales deals to meet monthly targets, rather than nurture more valuable, long-term customer ties.
Hilti teams in other countries have adopted similar systems.
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