What Happens When They're Not Making Their Numbers?

Charlie Munger called it the #1 psychological force in human behavior.

Reward and Punishment Superresponse Tendency

His point: Almost everyone thinks they understand how powerfully incentives drive behavior. Almost everyone is wrong. Even Munger admitted he underestimated it his entire career.

Here's why this matters to your next hire.

Every candidate sitting across from you is motivated by incentives. They will tell you what they think you want to hear. They will describe their best months, their biggest wins, and their most heroic moments.

You need to know what happens when the incentives aren't landing.

TRUTH CHECK

The real character of a player doesn't show up when they're hitting their numbers. It shows up when they're not.

Here's how to find out BEFORE you make an offer.

Run pre-mortems. Not one. Three.

Give your candidate a realistic performance scenario - a sales target, a growth goal, a team objective - whatever the role requires. Then walk them through three outcomes.

Great result. Define a great result in their role that maximizes their potential incentive pay.

Ask them to walk you through exactly how they achieved it. What did they do first? What were their key processes? What did they do consistently? What did they do when it got hard?

Listen for specificity. Vague answers mean they were along for the ride when someone else drove the result on their resume.

Neutral result. Define an okay result in their role that earns half their potential incentive pay.

Ask them where the bottlenecks were and what they did to overcome them. Ask what they would do differently.

Watch whether they take ownership or explain how the market, the team, or the company blocked their ability to achieve - victimhood or reasonable answer? People who blame neutral results on external forces will do the same thing to you.

Poor result. Define a poor result in their role that disqualifies them for incentive pay.

This is the one that may matter most. Ask them: How often do you confirm your incentive pay is on track? What happened to your motivation when you knew your incentive pay was in jeopardy? What did you tell yourself? What did you change? How did you collaborate with others to overcome your challenges?

Munger's Federal Express example is instructive here. FedEx couldn't get their night shift to perform - until they changed the incentive structure. Pay by the hour, you get hours. Pay by the completed mission, you get the mission accomplished.

Your team responds to the incentive system you build.

To consistently win, you need to hire people who get creative and more cohesive as a team when there are challenges - not those who play the blame game.

Two Trip Lines - Posers or Top Performers?

#1 - Ask them directly: "Tell me about a stretch where you weren't making your incentives. How long did it last? What caused it? What did you do about it?"

Then stop talking.

Watch whether they get honest or get defensive. Listen for whether they describe a real recovery with real steps or give you a rehearsed story with a tidy ending. Watch whether they can sit with the discomfort of the question or rush to escape it.

The candidate who can walk you candidly through a failure - and show you specifically how they got out of it - is far more valuable than the one who has never had a bad quarter on paper.

#2 - Ask them: " If the market turns against you in your first year here - slower economy, increased competition, tighter budgets - what is your plan to hit your number anyway?"

You are not looking for optimism. You are looking for a realistic plan developed on-the-spot based on wisdom, experience, and skill. It won’t be perfect because they aren't in the role yet. Look for nuggets - assets you can develop.

Munger was right. Well-designed, equal opportunity, fairly administered incentives are superpowers.

But the best hires bring something the incentive structure alone cannot create: The discipline to perform before the reward arrives.

That's the player you want on your team.

QUESTION: How do you test a candidate's response to adversity in your hiring process? Share it in the comments.

If you want to build a hiring tryout that reveals how candidates perform under pressure - not just on their best day - let's talk.

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