Ok, so this is a ridiculous title for a blog post. And I know what you’re thinking—it’s even more ridiculous that someone would be willing to give up $30,000 in compensation for some recognition and reward from their company.
Yet this seeming madness can be explained by delving into some deeply-rooted human behaviors as posited by Maslow’s Hierarchy, Deci & Ryan’s Self-Determination Theory, and Lawrence & Nohria’s Four Drive Model of Motivation. Humans are just hard-wired to pursue status, recognition, and admiration. For good or bad, these drives exert a powerful pull upon all of us. But when used ethically in business, they can result in some amazing outcomes and awesome levels of production.
So check this out…
A 2012 article by Ian Larkin, Assistant Professor of Strategy at UCLA’s School of Management, found that top-performing salespeople at a software company opted for essentially the scenario in this post’s ludicrous title. A report by the Incentive Research Foundation sets the table and summarizes the findings this way:
A large software vendor employs hundreds of salespeople compensated mostly through commissions. Standard commissions are 2% of sales, but they accelerate toward the end of the quarter based on accumulated sales. A salesperson who combines several sales into one quarter stands to earn commissions up to 20 times more than base commission.
Each year, the firm recognizes the top 10% of salespeople by including them in its “Sales Club.” Members of the club get a long weekend in Hawaii or the Bahamas (worth about $2,000), a gold star on their business card, and, presumably, the admiration and/or respect of their peers. It is important to note that membership in the Sales Club does not predict greater future sales nor any tangible career benefits, such as a higher promotion rate.
At the end of the third quarter each year, the firm announces the current rankings, letting sales people see how likely they are to end up in the top 10%. This typically leaves several dozen of the hundreds of salespeople in the firm on the cusp. If they close enough deals in the fourth quarter, they’ll get into the Sales Club. Within this group, about half each year also have big repeat contracts almost certain to close in the first quarter of the following year. If they push fourth quarter sales into the first quarter of the next year, they’ll trigger large accelerators and earn a lot more in commissions. This ”conflicted group” is the focus of the research.
The Results:
- The conflicted group was far more drawn to the non-cash, intangible reward (the Sales Club) than to the cash reward (accelerated commissions).
- On average, conflicted group members were willing to forego a remarkable $30,000 in commissions in pursuit of membership in the Sales Club. This represents about 5% of pay (the top 10% of salespeople earn, on average, $500,000 per year).
- Men, on average, were willing to give up $36,000 in commissions to get into the Sales Club, women, $15,000.
- Tenured, past high-performers were much more likely to work hard to close deals in the fourth quarter (and thereby forego accelerated commissions to get into the Sales Club) than historically average performers and relative newcomers to the firm. The latter were more likely to pursue the commission accelerator by pushing sales into the first quarter of the following year.
Actionable Take-Aways
- Nearly everyone needs recognition and appreciation to perform at their best. Peer recognition programs are proven effective in creating a “culture of appreciation.” This research dramatically underscores the motivational power of peer respect and admiration. Organizations should take heed—people work very hard (albeit to different degrees) to receive recognition, which is essentially free to the employer.
- Each person is unique. While the need for appreciation and respect may be universal, the degree to which people need it varies enormously. In this experiment, men need it more than women, and experienced, high-performers need it more than new salespeople and average performers. This underscores the importance of designing incentive programs that address both human universals and universal human uniqueness.
- Great care should be taken in designing programs like the one in this study. As Larkin suggests, the Sales Club program appears to deliberately incite end-of-year competition. Information about sales rankings is withheld until the end of the third quarter, then released. A certain segment of those who are on the cusp then swing into high-gear to get a spot in the Sales Club.
Conclusion
Isn’t the power of human motivation just incredible? It’s time to tap into this deeply rooted human behavior and combine the elements of competition, recognition, and travel rewards to spark the fires of success.
