sales manager chart

Selling Yourself (& Your Team) Short

tim_houlihan
Tim Houlihan
Chief Behavioral Strategist, BehaviorAlchemy

Editor’s Note: Sometimes we talk broad generalities here – “Why, by gosh, let us consider how entire organizations might use behavioral insights for wide ranging change!” – and that’s pretty cool. But sometimes it’s nice to go from very broad to extremely specific. Like we do here. Considering the behavioral principles impacting new sales managers … and how to overcome them.

But I warn you: Even if you’re neither a sales manager nor someone who knows one, you will get a lot out of reading this. As Tim says, “Sales managers are people, and people have biases.”

 

A few years ago, a top-performing rep told me how little he thought of his sales manager. “I can’t believe this guy is setting up an incentive for only the new reps!” he exclaimed. He thought that was bad design because it excluded the long-tenured reps. His underlying message, however, was that the design was bad because it excluded him.

Last week, during a happy hour to celebrate his promotion to sales manager, this same person confided that he’s going to rectify some of his predecessor’s bad deeds with a new sales incentive. “I know what it’s like. I need to show the top dogs that they’re going to be rewarded for pulling the sled. If the rest of the reps want a reward, they’ll have to rise to the top.”

Grimace.

Human behavior is influenced by lots of things. Self-image, beliefs, goals, the environment and our DNA all rank near the top of the list. But we can all (hopefully?) agree that it’s counterproductive to make business decisions based on an emotional desire for revenge.

Revenge is one of many strong emotions. Emotions can be deep-seated, as are the biases that influence them. For the most part, emotions cloud our decision-making. The good news is that we can do something about it. Sales managers will be more successful by becoming aware of some common behavioral biases, then taking steps to mitigate them. Here are a few to get started.

 

Emotions cloud our decision-making. The good news is that we can do something about it.

The Preference Reversal Effect

Humans like to believe we know what motivates us. But the fact is, we don’t. Our motivations and our preferences are situational. They can change even though we tend not to believe they do. Maybe you’ve heard this before:

Sales Manager says, “I know my reps want more money – it’s what I wanted as a rep – so now I’m going to give it to them.”

This belief doesn’t line up with the science of motivation. The more effective reward is not always the preferred option – preference doesn’t always equal behavior. Both field and lab studies show that non-monetary rewards help sales reps generate better results than monetary rewards. (Editor’s note: Here’s a piece we did on cash v. non-cash rewards plus some other really great stuff on the same. More on this to come!)

For the sake of clarification, non-monetary rewards have no explicit price tag on them. While everything has a price, a non-monetary reward isn’t promoted for its cash or retail value. It could be “Dinner for two at your favorite restaurant” with no price limit or a big screen television without the cash value plastered on the copy. A monetary reward comes in the form of cash, a check, a direct deposit or a utilitarian gift card, such as a $50 American Express gift card. When the monetary value is explicit with the reward, motivation is altered for the worse.

Scott Jeffrey, PhD, and Victoria Shaffer, PhD, among others, have studied this issue on two levels. They sought out people's preference for what they believed would be the most motivational reward, and they tested which types of awards would drive the highest results.

When it came to preference, they found that a monetary reward (money) was preferred over a non-monetary reward (a prize) in side-by-side comparison. Logically, money is universally preferred over prizes for fungibility and perceived utility.

When no comparison was possible, however, those in the non-monetary condition performed better than those in the monetary condition. In one study, cash generated a lift over the control group of 14.6% compared to the non-monetary group delivering a 38.6% lift. Ironically, after the awards were distributed, 64% of the non-monetary group said they would have preferred to have cash as the reward. Even after delivering better results, but not knowing the cash group did worse, the non-monetary group believed cash would have been a better motivator.

We don’t know our own motivations.

Our motivations, and our preferences, are situational.

The preference reversal effect explains how our preferences are malleable, situationally dependent and not stable. They’re also not always in line with our true motivations.

Recognition of good performance is also a powerful and inexpensive non-monetary reward. It helps reps engage in the right behaviors using simple encouragement while doubling down on the behaviors that led to the performance. (Editor’s note: See also You Better Recognize.)

A call center manager shared a story of how she used recognition to spur the development of a new behavior. She overheard a rep stumbling over a new script for cross-selling. The manager praised the rep for her effort. The following week, the manager noticed the rep made her first successful cross-sell. When the manager praised those results, the rep acknowledged that the manager’s recognition of her effort was at the heart of what kept her working hard to refine her pitch. No money needed.

Think about it this way: the farther away from the dollar sign, the more motivational the reward.

TRY IT: Pilot a non-monetary incentive. Give your reps the chance to earn something meaningful, and without the price tag, based on their ability to grow their business over a short period of time. Measure it. Focus on real data, not gut instincts, to reduce the effect of your own biases. When you use non-monetary rewards, the reps will appreciate the memories they accumulate with those things and consume them for years to come.

Idiosyncratic Fit

A friend on a cross-country motorcycle trip stopped in a bar in a small Midwestern town. He noticed a raffle (known locally as “pull tabs”) and that the top prize ($500) was yet unclaimed. He inquired about the number of tickets left – there were 21 – and he quickly calculated that the $500 prize would be a good economic return even if he had to buy all 21 tickets at a $1 each.

Why the 21 tickets remained – with the top prize unclaimed – was a head scratcher. Others in the bar must have seen the same thing, but my buddy was the one to act on it. He bought one ticket at a time and discovered the $500 winner after only 9 tries. His investment of $9 and a few minutes yielded a $500 return.

Who wouldn’t rationally do the same? Others in the bar didn’t. And while it’s a fair question, the more relevant issue to this discussion is about how my friend felt. It was as if hidden forces had conspired to make his win happen. It was all his. Yes, it was good fortune, but even more than that, it felt like perfection.

Idiosyncratic fit feels that way. It’s when the rules of a contest are written in such a way as to give the participant a sense that they have a unique advantage.

Sales Manager says, “My sales reps are unique.”

Your sales people are not as unique as you think they are, but they like to feel that way. You’re right to try to make them feel special, because people who “feel like winners” put in more effort. This is the case with how idiosyncratic fit feels: “I will exert more effort when the rules appear to provide a particular advantage to me.”

 

Your sales people are not as unique as you think they are, but they like to feel that way.

Ran Kivetz, PhD, and Itamar Simonson, PhD, studied idiosyncratic fit. In one of their studies, Kivetz and Simonson offered dining cards to students at an on-campus eatery that sold general sandwiches and sushi. The card was a run-of-the-mill buy-10-get-1-free deal. In one condition, any lunch would count, and in the other, only sushi counted towards the 10. Not everyone loves sushi, so the "any sandwich" condition appeals to a broader audience and should have generated more sales.

Sushi lovers, however, received the sushi-only condition with zeal and expended more effort to fulfill their requirements than those in the any-sandwich condition. Sales increased at the shop overall because the sushi lovers just killed it.

Back to sales reps. When reps feel like the comp plan and rules are individually tailored for them, they deliver better results. Rewarding incremental effort relative to each individual's current run rate generates that feeling of "the rules were written for me." When a rep sees that the rules are individualized, they are more likely to feel that sense of idiosyncratic fit, which, in turn, engages them to work harder.

 

A comp plan or incentive plan might, therefore, get better results when reps feel like the rules were individually tailored for them.

The catch? Sales managers also need to expend more effort. You need to dig deeper into the data and the environments in which each rep is selling and assess their current run rate for the opportunity in each territory. The more a sales manager understands the data and reps’ behaviors, the more likely a solid design will be created.

Consider climbing Mt. Everest. The highest mountain on Earth, at over 29,000 feet, it takes the lives of even the most elite climbers every year. It is challenging and very few succeed. Requiring every rep to metaphorically climb Everest will exclude lots of talented, but not elite, reps. There are, however, 96 peaks in the United States that are taller than 14,000 feet. More of your reps could climb those, which would still be pretty impressive. Don’t try to make Everest the goal for everyone when it’s not the only meaningful summit.

TRY IT: Write an incentive program with rules so that everyone can feel like they were written expressly for them. Give each rep a chance to earn a reward by doing better than they’re doing now, and make the steps relevant to their opportunity. In other words, a top performer may have less headroom and be asked to improve by a small percent compared to someone lower who has more room to grow. Making incentives relevant is critical to their success.

Implicit Bias

Even among sales people, a top performer can share a stronger bond with other top performers than the rest of the sales force. It is natural to favor people we consider in-group over those who we consider out-group.

This bonding is hard wired into our DNA. Paul Lawrence, PhD, and Nitin Nohria, PhD, researched bonding and belonging in their work on the 4 Drive Theory. While those bonds can bear fruit, dragging them from the world of the sales rep into the world of the sales manager can have negative effects. Here’s how an overly enthusiastic sales manager favors his or her own mini-tribe:

Sales Manager says, “Only the best performing reps should earn awards.”

This bonding stems, in part, from implicit bias. Most sales managers were once top-performing reps. Top performing reps tend to believe that their success is nearly entirely due to their own ingenuity and hard work. (While that is true to some degree, it doesn’t account for reps who work hard but deliver lesser results for other reasons.) Implicit bias is at the heart of this belief that top performers summit because of their effort, and only they deserve rewards. It’s tantamount to privilege, and more importantly, it gets in the way of maximizing results.

 

Top performing reps tend to believe that their success is due – nearly entirely – to their own ingenuity and hard work.

Mike Ahearne, PhD, and Tom Steenburgh, PhD, researched sales people and the incentives often used to motivate them. In one case, Mike worked with Noah Lim, PhD, and Sung Ham, PhD, to set up a field study to see how sales reps would respond when the entire awards budget was offered to only the top performer versus when the same budget was spread over multiple winners (the top six, in this case).

Their findings indicated that spreading the same budget across multiple winners improved overall sales delivered. In this study, the multiple-winner group produced roughly 55% more sales than the single-winner group.

Frequent flier and hotel night-stay programs have multiple levels. This is in part to overcome the unobtainable nature of the top spot for so many people and in part to break up the goals into more meaningful chunks. Sales managers must be willing to confront their implicit biases with regards to gender, race and sexuality, of course, but they also need to pay attention to the subtler biases that impact how they design incentives.

TRY IT: Develop a sales incentive that uses different rewards for many different levels of performance. Engage the maximum number of people by spreading the rewards among many different categories. Go beyond just rewarding the top five or 10 reps by stratifying them into competitive tiers. Allow the reps in the 50th percentile to compete for a reward against the reps in the 48th and 49th percentiles, so their competitors are more relevant. Get creative.

They also need to pay attention to the subtler biases that manifest in how they design incentive programs.

Closing Thoughts

“When sales reps mysteriously transform into sales managers, they are endowed with previously unavailable magical powers of authority, insight and wisdom.” – No one, ever.

Sales managers are people, and people have biases. One of the best things sales managers can do is build self-awareness and work-arounds for these common biases. Sales managers will suffer from preference reversal just as their reps will. Taking steps to pre-commit to using non-monetary awards or changing up the design of a quarterly incentive can help offset the tendency to get caught up in the moment.

People – sales managers included! – can leverage idiosyncratic fit to their advantage. Help reps feel special by designing a comp plan that leverages their individual strengths and the trends in their territories, rather than relying on legacy programs and disconnected dictates. Get them feeling that they are as special as they think they are.

Sales managers don’t have to create everything themselves. Not every incentive or compensation idea needs to be customized if an off-the-rack outfit will suffice. Behavioral science tools are available to boost output of teams with measurable results. But in order to do that, we must address old biases , try data-driven approaches, and put why-we-do-what-we-do questions at the heart of the design. The things that stand in the way of success can be tossed aside.

 

We must address old biases, try data-driven approaches, and put why-we-do-what-we-do questions at the heart of the design.

New sales managers should take ownership of their job, the same way you’d take ownership of a “Best Manager Ever” mug. Do it thoughtfully and with self-awareness, leave your biases at the door, and enter a room of greater success.

 

tim_houlihan
Tim Houlihan
Chief Behavioral Strategist, BehaviorAlchemy

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