Nobody had to tell the economists what they would find first. Companies promote their best salespeople. Everyone knows that.
Alan Benson, Danielle Li and Kelly Shue wanted to know what happens next. Their data came from a company that sells sales-performance software: every deal, at 131 client firms across the United States, from 2005 to 2011. Out of 38,843 salespeople, 1,553 were promoted into management.
The obvious part checked out. A rep who doubled her sales relative to her colleagues, roughly a jump from the middle of the pack to the 67th percentile, was about a third more likely to be promoted. Being the top seller on the team counted on top of that.
Then the researchers looked at the teams those new managers took over.
In the published version of the paper, new managers whose pre-promotion sales were twice as high had subordinates whose sales were, on average, 6.1% lower. With five people on a typical team, the authors worked out, that was close to losing a third of a salesperson’s output. In their simulation, the people firms actually promoted were predicted to be slightly worse managers, on average, than the teammates who were passed over.
The salespeople who did make better managers had a different record. They had shared credit on deals with more colleagues. Firms did not consistently promote them.
“We find that the best salespeople are very likely to be promoted into manager positions,” Shue told NPR. “And then when they become manager, they appear to be worse at the managerial job role.”
The researchers did not conclude that the firms were foolish. When a weaker seller was promoted over stronger teammates, the stronger ones were 23 percentage points less likely to still be at the company a year later. Firms whose managers ran bigger teams, or whose sales staff already earned strong commissions, put less weight on sales when they picked managers.
By the paper’s estimate, promoting the best potential managers would have raised manager quality by about 30%, measured by their subordinates’ sales. The authors read that gap two ways. Either the firms were making a costly mistake, or keeping their best sellers in the race was worth that much to them.