The Do's and Don't's of Spiffs
by Sueños on 01/17/17
I worked in an aggressive sales position throughout my undergrad. During that time I saw all kinds of spiffs, $1 for each product sold, contests for large prizes based on total sales for the month, the list is endless. However, these practices aren't always what's proven to be the most effective. I wanted to take a moment to discuss what means are the most effective for driving performance, and increasing cohesion.
Variable-Ratio Reinforcement Schedules
There are two types of reinforcement schedules, fixed-ratio and variable-ratio. Fixed ratios are just that, fixed. For every product, or perhaps every 3 products an employee sells, they receive a reward. A variable ratio is similar, however, the reward is instead issued an average of 3 times. This can be likened to a slot machine. The behavior, pulling the lever, rewards us an average of 12 times. Meaning sometimes it takes exactly twelve, sometimes it takes less than twelve, sometimes it takes much more than twelve. The interesting thing about variable-ratio reinforcement schedules is they tend to elicit the desired response more steadily than fixed-ratio reinforcement schedules, and with less of a delay between receiving the reward and beginning work again. Here's a study done with pigeons exhibiting this concept.
The more you think about it the more sense it makes. If you know you need 10 sales to receive a bonus, you will probably work very hard to receive the first three sales. However, by the time you get to three, getting a sale feels less exciting, and you still need 7 more before you're reinforced. So, you still work, but not as aggressively, towards getting the remaining sales. Eventually you hit 8, well now you only need 2 more sales to receive your bonus. Well then you start working very hard to get those last two sales, because your reward is just around the corner! With a variable-ratio schedule the reward could always be just around the corner. Because of this, you see less severe scalloping. (The pattern of hard work, lull, and then hard work talked about with fixed ratio schedules. Named after the pattern it leaves when graphed). A great, and easy, way to do this is allowing an employee to spin a wheel for prizes each time they make a sale, or perform a desired task. You can then customize the ratio you want the wheel to pay out at, and see what ratio is the most cost effective.
Don't Make Initial Goals Unreachable
Goal setting can be tricky, especially in sales. If you're reading this, then you probably know that. What I want to emphasize is that it should be a stretch, so that the employee has to think of new ways to succeed, but not so much that the employee never meets quota. Not being rewarded at all is a sure way to watch someone's performance drop off the deep end. If an employee is performing poorly, one should instead set goals that require a slight change in behavior. This in essence is a practice known as shaping, which is rewarding a subject for successive approximations. It's how dogs learn to do back flips, and it's also how humans learn the new behaviors that comprise a killer work ethic.
No Contests
This may sound heretical, as competitions go with sales like peanut butter and jelly. However, this conclusion comes as an antecedent of our discussion of fixed ratio schedules. If the potential for reward is removed or its size reduced suddenly, the desired behavior will begin to decrease, a phenomenon known as extinction. Contests can artificially produce this scenario. This happens because some employees may fall so far behind that of another, that the chances of them receiving the prize severely decreases to what they perceive as zero. Even though the employee may still receive their ordinary commission, the size of the reward for the behavior is now reduced, subsequently so is the frequency of the behavior.
For more on ratio schedules and Operant conditioning, check out this youtube video: https://www.youtube.com/watch?v=6Ofbt16AJgg
This is a guest blog by one of our coaches Diego Andreas. If you like what you read, check out his blog www.wonderingintomyself.com
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