If your sales team had under-performed over the last two months would you offer words of encouragement, or deliver a sharp word or two? Many managers would tend to the latter of these two options simply because experience would suggest that stern words tend to work. It is a common experience that when a sales team (or any other team for that matter) over-performs, the encouraging words don’t really seem to have any long term effect, whereas threats do actually seem to work. There is a reason for this, but it has nothing to do with motivation.
The average monthly sales of a team, taken over a respectable amount of time (a few years say), will act as a sort of magnet. Sales may be high one month and fall back to the expected levels the next. Same with poor sales. There is a good probability that they will bounce back to the mean. The dynamics of this situation lead to the erroneous belief that encouraging words given to a team that has outperformed seem to carry no weight – next month’s sales are likely to be in line with the average after all. But it is the converse situation that leads to the belief that chastisement leads to improved performance. After a month of dull sales the following month is once again likely to bounce back to the average, leading to the false conclusion that chastisement works.
Of course there are lots of other variables, but this phenomenon has been well studied and research has shown that encouragement is always a greater motivator than criticism. The more general problem of establishing when sales are really falling or rising is much more difficult than a graph might suggest. Such is the random nature of things that several months of poor performance might occur with no implication for long term performance. Ultimately we have to rely on an understanding of the business and be aware of probabilities. At what point does under or over performance indicate a change in market dynamics? If there is only a one per cent chance that a variation in sales could happen randomly then it might be time for action. The threshold might be set at ten per cent or any other level – it’s a management decision. Unfortunately such considerations are not usually taken into account, and there are many documented cases of executives being fired for short term under-performance when the record shows that they had actually got it right. Several bosses in the movie industry have been fired because a couple of movies underperformed, but where the pipeline of future movies they had sponsored was successful. It all requires a basic understanding of probabilities – but I’m not holding my breath.