It’s tempting to promote your best salespeople into sales leadership roles. But it can be a mistake.
Top sales leadership skills can be quite different from the competencies of top salespeople. So, promoting top sales reps into management can be double jeopardy: Not only do you install an ineffective sales manager who lowers overall sales force effectiveness, but you also lose a great salesperson.
The mistake of promoting an employee who is outstanding in doing their job until they reach a level at which they are no longer competent is part of management conventional wisdom. It’s called the Peter Principle. But to date, there have been few, if any, systematic attempts to examine whether firms promote the best employees at the expense of promoting the best potential managers.
To test the Peter Principle, Danielle Li (MIT), Kelly Shue (Yale), and I studied 1,553 promotions of B2B salespeople to sales management roles in 131 companies over six years. We found that the more successful the salesperson was pre-promotion, the less successful their sales team was after they became a sales manager. In other words, selling success was negatively correlated with sales management success.
Great salespeople practice the profession of selling: they do their homework about customer needs, they listen and adapt to what they hear, they exude confidence and expertise, and they do the million other professional selling tasks that win the sale.
Great sales managers are leaders. They recruit and coach and create a culture that enables a team of winning salespeople to practice selling and deliver strong results.
Predicting Sales Management Success
If selling success does not predict sales management success, what does? In our study we found three predictors of sales management success: they tended to be high collaborators, their organizations had flat hierarchies where managers took charge of large sales teams, and their organizations rewarded their peers who may be stronger salespeople with greater pay rather than promoting them.
1. High Collaboration Sales Jobs
Excellent sales managers rarely came from the ranks of “lone wolves.” Instead, great sales managers were more likely to be collaborating and sharing credits with others at their organization. In some cases, they held the same jobs as lone wolf salespeople but were more likely to craft complex deals that spanned multiple products or territories, involving more members of the sales team. In other cases, they were in roles that naturally lent themselves to collaboration, such as account managers who work with marketing segment managers to craft and present sales proposals, or account executives who work across multiple functional areas (e.g., Marketing, Finance, Customer Service, Logistics) to craft winning contracts, install them effectively, achieve company profitability, and ensure customer satisfaction.
Regardless of industry or job design, the finding was clear: successful sales managers were collaborators before they were managers.
The collaboration finding suggests the type of leadership skills that may be valuable in management. Lower level salespeople may need to take a “carrot” approach to consensus building within their organization—building consensus with both their peers and management to execute complex deals. Promotion into management allows them to use “the stick” with subordinates. But a management title does not grant high influence and motivation skills. So, it could be that less effective sales managers resort too often to the stick rather than what may be more effective carrot methods.
2. Large Teams
In our study, we found that great salespeople often became poor managers who detracted from their subordinates’ performance; their subordinates performed better when working under other managers. The costs of bad management are particularly pronounced when one manager is responsible for many subordinates.
We found that organizations with flatter hierarchies—those where one manager was responsible for a larger team of subordinates—tended to be better at promoting the best managers rather than the best salespeople. In these cases, it’s especially important to provide strong financial incentives to the best individual contributors, which brings us to our third finding.
3. Strong Incentives
The third factor we found to predict sales management success was pay-at-risk. When pay-at-risk is too low (e.g. 20% of target pay), star salespeople who stick around have little opportunity for pay growth without entering management. When pay-at-risk is great (e.g. 80% of target pay), star salespeople can earn more in sales than they could as a manager. In our study, we found that organizations that promoted the best managers tended to be organizations that put the most pay-at-risk among its salesforce. This appears to free them to use promotions to select the best manager.
Put together, the Peter Principle was kept at bay by organizations that aligned incentives, job design, and rewards so that salespeople could excel using their own personal talents. The most successful promotions came from within organizations that featured both individual contributor and collaborative roles, and used high-powered commissions to motivate the former and promotions to motivate the latter. These organizations were most able to source managers among the best potential managers, not just the best salespeople.
Why Do We Promote the Best Salespeople?
Promotions are often used to reward good performance. If a salesperson makes quota the second year on the job and then earns President’s Club for the next three years, we want to reward their performance with a promotion. Often promotions are the only way to give the high performer a significant bump in income. Executives look at the top performers and say to themselves, “Wouldn’t it be great if all our salespeople performed like Sarah or Tom. Let’s put them in charge of a sales team.”
If the high performing salesperson also is a collaborator and a leader, this may be fine. But if the high performer is mostly a loner salesperson, it could reduce sales team effectiveness. They will probably place too little emphasis on collaboration and too much emphasis on individual contribution. This can undermine overall sales performance, especially with large sales teams.
If your high performing salesperson is a collaborator, they could potentially deliver even more value as a sales leader. They will be more likely to create a team of high performing salespeople through smart recruiting, coaching, creating a sales-supportive culture, and demanding results. If so, go ahead and promote them.
But make sure it’s for the right reasons.
Alan Benson is Assistant Professor in the Work & Organizations Group at the University of Minnesota's Carlson School of Management, and a member of the Graduate Faculty of Minnesota's Department of Applied Economics and the Minnesota Population Center (MPC). He received his PhD from the Institute for Work and Employment Research at the MIT Sloan School of Management.
His research is on work and employment issues, and especially on the economics of human resources. His teaching includes compensation and benefits for Master's of HR students, negotiations for MBA students, and labor economics for PhD students. He is also instructor for a Coursera course on compensation and benefits. He has run professional seminars in negotiations, compensation, and people analytics.