Sales quotas have long been a staple in boosting performance, serving as a tried-and-tested mechanism to incentivise sales teams. However, their effectiveness is far from guaranteed. According to a 2022 survey by Salesforce, only 28% of sales professionals were reaching their targets, highlighting a gap between the intended motivational impact of quotas and actual performance outcomes. This disconnect raises essential questions about how sales incentives are structured and whether they truly reflect the diverse motivations of those they aim to engage.
Recent research from the McCombs School of Business at the University of Texas sheds new light on this issue by examining how different types of salespeople respond to quota cycles of varying lengths. Doug Chung, associate professor of marketing, has found that individual attitudes toward time—specifically, how people value present versus future rewards—play a crucial role in determining the effectiveness of sales quotas. Future-oriented people tend to excel when working towards longer-term goals, as they are motivated by the promise of a significant reward at the end of an extended period. Conversely, more present-focused salespeople tend to disengage when faced with distant goals and instead thrive on more immediate, short-term incentives.
Chung illustrates this with a simple but telling example: if someone does not value future rewards, they will unlikely exert effort in January for a bonus that may only materialise in December. Such individuals, he argues, require “pacers”—frequent, tangible incentives to sustain their motivation throughout the quota period. To test this theory, Chung collaborated with Byungyeon Kim of the University of Minnesota and Byoung Park of the University at Albany, SUNY, in studying a Swedish electronics retailer with 100 store locations. This company had been using a monthly sales quota system but observed a troubling pattern: if sales were sluggish during the early days of the month—perhaps due to pleasant weather drawing customers outdoors—employees often gave up on meeting their targets altogether.
In response, the company transitioned midyear from monthly quotas to daily ones, aiming to reinvigorate its sales force and counteract early-cycle apathy. Chung and his colleagues analysed performance data before and after this change, with telling results. Sales among low-performing staff improved significantly under the daily quota structure. These shorter cycles offered more frequent opportunities for success, preventing the early-month disengagement plaguing the monthly system. “These short quota cycles benefit the less motivated salespeople,” says Chung. “It motivated them not to give up.” Interestingly, top performers experienced a slight decline in performance under the new system, possibly due to the interruption of longer-term momentum. However, overall sales variability decreased, making business forecasting more reliable.
These findings support the argument that sales quota design should be more tailored, considering the differing motivational drivers among employees. Shorter quota cycles appear especially useful in energising lower-performing or less future-motivated salespeople, whereas longer cycles may better suit high performers who can maintain long-term focus. Chung stresses that while time preference is a significant factor, it is not the only consideration. The nature of the product or industry also matters. Extended quota periods may be necessary in some sectors, such as those with long sales cycles or complex procurement processes. However, long cycles also introduce risks—such as illness or absence—that can disrupt progress over time.
Looking ahead, Chung is exploring an innovative approach to sales compensation: allowing employees to choose the quota cycle that best suits their working style. Some start-ups have already adopted this model, offering flexibility to their sales teams. Yet widespread adoption remains limited, mainly due to concerns around fairness and cultural cohesion within organisations. “Once sales comp is different, even if the salesperson selected it, they might question its fairness,” Chung explains. Ultimately, the research suggests that moving beyond a uniform model and recognising the diverse motivational profiles of employees may lead to more effective, adaptable sales strategies—and better performance outcomes across the board.
More information: Doug Chung et al, Time Dependence and Time Preference: Implications for Compensation Structure, Marketing Science. DOI: 10.1287/mksc.2022.0037
Journal information: Marketing Science Provided by University of Texas at Austin