Part II/Myth #1
Rewarding the top 20% pulls the sled
According to incentive industry research, a "top 20%" rule only engages about 35% of the reps – the rest disconnect because they don't envision themselves as having a chance. Disconnected reps are the enemy. They deliver less than poor-performing reps, but hard working reps, so a rule that disenfranchises a large portion of your audience under the illusion of motivation is a bad idea.
Why don't 65% of the reps respond when the award is offered to the top 20%? We don't take risks that we don't believe we can achieve. You'd never see one hunter chase the elephant if the rest of the tribe's hunters aren't helping. Nor do many people begin climbing Mount Everest if they don't believe they can reach the top. Humans are excellent at conserving effort.
Finally, while you may think that the middle and bottom performers are merely free riders not pulling their weight intentionally, you'd be wrong. Researchers find that bottom performers are expending effort and feeling guilty about not being on top and, because of that, they are working hard. Free riders are pretty rare.
The BS (Behavioral Science)
The underlying behavioral science bias referred to as Risk Compensation. It comes into play for the reps who are not close enough to the goal to feel secure in striving for it. They become more careful where they sense greater risk, and they pull away from chancy deals.
That said, rewarding the top 20% of reps isn't always a bad idea. Such a rule can recognize achievement on top of an existing incentive. It's called an overlay. Using an overly allows for a small portion of the reps to earn extra rewards while the more substantial share of the reps still can participate with rules and prizes that are relevant. The overlay is purely additive: it puts more flavor in the juice.
A recently-promoted sales manager who was consistently in the top 20% as a rep and was a frequent subject of the "Top 20%" incentive, couldn't wait to use it on her own reps. As a rep, she lacked visibility to those who didn't earn – they weren't in her immediate line of sight – so the adverse effects weren't noticeable. As a result, she failed to acknowledge that most reps would not be engaged because they were too far away from being in the top 20%.
When she attempted to implement an incentive that only rewarded the top 20%, she was surprised when sales didn't jump through the roof. She discovered, the hard way, that well-designed incentives engage the majority of the sales force, not just the top few. She was suffering from her own form of availability bias where she relied on experiences that were vivid to her, but not relevant to others. A better way to go would be to rely on useful data.
PRO: A top 20% reward/recognition is a great way to call attention to the top reps when other incentives are already in place. When all reps feel like they have an opportunity to earn, the firm benefits from the most substantial impact of motivation. Adding some sugar to the cereal could cause top-performing reps to feel exceptional and more motivated to contribute commensurate with their stature in the organization.
CON: A top 20% rule does not maximize engagement or results because the majority of reps don't see themselves as being able to earn. When confronted with a bad bet, most reps won't take it. Most reps go on about their day focusing on the most immediate aspects of their job and skip worrying about an incentive that doesn't apply to them.
About the Author
Tim Houlihan is the founder and chief behavioral strategist of BehaviorAlchemy, LLC, a consultancy using a behavioral lens for improving the actions of workers, customers and policymakers. He co-founded Behavioral Grooves, a meetup and podcast with listeners in more than 80 countries. Previously, Tim was Vice President of Reward Systems at BI WORLDWIDE where he was responsible for a $300 million global portfolio of reward systems, acted as the firm's thought leader in behavioral sciences and was the chief liaison to research partners around the world. Tim believes people underestimate the role of the unconscious in our behaviors. The application of good behavioral science can remedy that.