EXPRESS: Incentive Design for Sales Managers: Impact on Resource Allocation and Performance

Many firms struggle to design effective incentives for sales managers . Yet despite a vast literature on salespeople’s incentives, little theoretical or empirical research has examined managers’ incentive structures. The authors address a common dilemma that firms face: Should managers’ incentives be based on achieving an aggregate target ( Aggregate Target Scheme , ATS) or instead be linked to the target achievement of each individual territory or salesperson ( Individual Target Scheme , ITS)? A quasi-experiment reveals that, despite ATS’s flexibility and apparent alignment with firm objectives, an ATS-to-ITS transition improved performance , with larger gains among lower-performing and higher-span territories. A scenario-based experiment with sales managers suggests that these effects may stem from the reallocation of resources from high to low performers but provides no evidence of an increase in managers’ overall resource investment. A survey of sales leaders indicates that a sales star bias —a managerial tendency to overallocate resources toward high performers relative to their marginal returns—likely drives suboptimal resource allocation under the flexible ATS. Finally, a supplementary field study documents that, following an ATS-to-ITS transition, managers increased joint fieldwork , especially with the lowest performers, and performance again improved. These results provide insights into managerial incentive design and offer guidance for firms.