The Ratchet Effect

What the evidence says

Ratcheting occurs when future performance requirements rise because of current performance. Sometimes that is rational. The danger is making exceptional performance automatically increase tomorrow’s requirement.

A 2026 field study in a large Chilean beverage producer and distributor found that a one-standard-deviation reduction in sales-goal ratcheting was associated with an average 19% increase in sales. The authors’ estimate for eliminating ratcheting entirely was larger, but explicitly presented as an upper bound for that setting.

The mechanism is straightforward: if extraordinary current performance reveals information that management will use to make the future harder, sellers may have an incentive to restrict output, delay deals or conceal upside.

What this challenges

• “You did £700k, so £700k is now the baseline.” Actual performance is not identical to repeatable capacity.
• Automatic year-on-year uplifts based only on last year’s result.
• Target systems that unintentionally teach sellers to sandbag forecasts or move deal timing.

What sales managers should do

• Diagnose what created the overperformance. Which customers, deals and conversion changes explain it?
• Separate what was repeatable from one-off events, unusual timing, competitor exits or unsustainable effort.
• Rebuild the Sales Maths. Did deal value, conversion, volume, cycle time or capacity change structurally?
• Change only the assumptions the evidence supports.
• Ask what behaviour the new target will teach a rational seller next time.

Beneath the Surface