Salespeople hate being mocked.
Nothing stings more than receiving a fake cheque for an incentive you didn’t earn—a public reminder of missed opportunity. It’s like poking a bear.
I was one of eighteen, and each of us suffered that humiliation.
On paper, the incentive for new business should have worked. The rewards were substantial. But we were already hitting targets and earning good bonuses without it. There was no urgency to chase new business.
At the half-year sales meeting, we expected congratulations. Instead, by lunchtime, we felt tried, found guilty, and paraded in front of everyone. The fake cheques showed exactly what we could have earned—if we had delivered.
Lunch was silent. Some colleagues fought back tears. For others, including me, humiliation quickly turned into determination. I left the room set on meeting my new business target.
Maybe that was the outcome they wanted. But years later, I still wonder if that harsh approach was necessary.
Charlie Munger famously said, “Show me the incentive and I will show you the outcome.” On paper, our incentive for new business should have worked. But it didn’t. Why?
Our commission structure had three layers:
The main incentive dominated. New business was a small, though growing, part of the bonus, so it was easy to overlook—especially as its initial impact on earnings was minimal.
We missed the power of accumulating new accounts. Because revenue stacked each month, some fake cheques were worth nearly £5,000 after six months. Most of us earned less than a quarter of that.
The message on those cheques was clear: “Look at what you could have earned.”
Despite the negative tone, the board understood the real issue:
“Never, ever, think about something else when you should be thinking about the power of incentives.” — Charlie Munger
To fix the problem, the sales director put the ‘lost’ earnings back in the pot, provided we hit the last six months’ target. This meant a possible bonus of £10,000 at year-end—a 25% increase on normal earnings.
Now, they had our attention.
By year-end, 80% of the team hit their revised targets. New business grew. The incentive, finally, worked.
Years later, when I had to design incentives myself, that experience stayed with me. The old incentive could have paid more, but the early rewards were not enough to get our attention.
Incentives that pay sooner—even if they’re greater later—win mindshare and drive action.
The revised incentive paid out sooner, with bigger monthly rewards. Combined with that wake-up call, it was the perfect scheme.
Interestingly, the sales target for new business didn’t change. The only difference was how soon and how clearly the payout was offered.
Even twenty years later, I remember the humiliation. But it was the incentive—not the shame—that delivered results.
As a leader and decision-maker, understanding incentives is critical. They’re levers that tap into the mental biases of your colleagues and customers. Start with the outcome you want, align incentives to it, and you’ll see remarkable results.
But beware: any incentive is weakened if easier or quicker rewards are available. People will always chase the path of least resistance.
When you understand incentives, you understand human psychology—and that gives you the power to achieve goals through others.
The right incentive, at the right time, turns potential into performance.
What are your experiences with incentives?
