Part V / Myth #4
You’ve got to hit quota to qualify.
In most firms, only 58% of reps achieve quota.
Using quota as a gate or qualifier to earn in an incentive program is usually intended to accomplish one of a few objectives: 1. To signal the sales force that under-performing reps won't be recognized. 2. To signal senior leaders that below-quota performance is not rewarded. 3. To engage motivation in below-quota reps to reach quota.
It's easy to achieve #1 and #2 with such an incentive rule because the signals are clear and robust. However, achieving #3 isn't going to happen with this design. Nearly all qualifiers in incentives exclude a portion of the sales force with the ultimate effect of reducing results. Much like a qualifier that rewards only the top 20% or requires a particular mix of products be sold, the qualifier engages a group of people (a) already within the gates and (b) slightly outside the gate. The rest of them feel doomed.
For those inside the gate, there are no motivational assets gained from such a qualifier. If the reps are already managing to be above-quota regularly, why try harder this incentive? The gate means nothing to them. Top performers are in the same boat: there is no additional motivation to require above-quota performance when they're already there.
For those slightly outside the gate (slightly below quota or close to the mix required to earn), there may be some motivational quality to get inside the gate. However, much of that motivation relies on perceived achievability.
Also, for those who are not within reach – for whatever reason that maybe – there is only despair. If they cannot see themselves achieving quota, why go after the incentive at all?
The complication of the qualifier is likely to shut down some reps, leaving potential results on the table, and it certainly won't act as a means to motivation among those who are already comfortably within the range of achieving quota. The only band of people motivated is those close to meeting the qualifier who see themselves as standing a chance of achieving it.
Dale Carnegie in his 1936 classic, How to Win Friends and Influence People, tells a story of Joseph Allison, a sales rep for Westinghouse Electric Company. It took Allison and his predecessor a whopping 13 years of sales calls to make their first sale to a particular customer in their territory. We don't know if they struggled with quota, but we do know that they were spending at least some of their time attempting to persuade a prospect that took many years to place their first order. A mandate of "only if you reach quota" is demoralizing for those in it for the long run.
The BS (Behavioral Science)
Risk Compensation is one of the pillars of behavioral science that comes into play for the reps. Risk Compensation is what happens when reps perceive a situation to be hopeless and they immediately withdraw from it. When asking reps to meet two bogies rather than just one, they assess with greater care, often causing them to decide with more discernment about what to do. It becomes easier to withdraw if the reps believe the qualifier is too far out of reach.
The second is more focused on a bias that the sales leaders often have: Survivorship Bias. Survivorship Bias focuses on the people or things that "survived" some process while inadvertently overlooking those that didn't because of their lack of visibility. It's similar to how people process lucky breaks in their lives as brilliant decisions rather than fortunate coincidences. The vast majority of sales managers were once successful sales reps. In looking back, it's easy to have fond memories of contests they won (the survivors), regardless of how the non-winners (the non-survivors) managed.
A client created a rule that required each rep make a minimum number of calls each month to earn a quarterly bonus. The intent was to add focus to the process and reward reps, ultimately, on results. In an exercise of modeling the data, it was revealed that the requirement for sales calls would have eliminated 80% of the top reps from earning the quarterly bonus. Such a change would have decimated their morale and, hence, sales revenue.
After some discussion, the client chose to readjust their budget to provide an incremental reward for reps who achieved or surpassed the minimum number of calls. Most reps in the sales force grew both their number of calls, which produced increased revenues in the following quarter, and their immediate results.
PRO: A qualifier never has a positive effect.
CON: Qualifiers create barriers, even if only psychological, to incremental effort among sales reps. When the purpose of the incentive is to increase motivation, such impediments are ill-advised.
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.