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Why Must You Pay Sales People Commissions?

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Re: Why Must You Pay Sales People Commissions?

#11

Post by csours »

Putting prediction hat on before reading article: "because your competitors pay commission"

> Company A pays commissions and, if you do what you know you can do, you will earn $1M/year. Company B refuses to pay commissions for “cultural reasons” and offers $200K/year. Which job would you take? Now imagine that you are a horrible sales person who would be lucky to sell anything and will get fired in a performance-based commission culture, but may survive in a low-pressure, non-commission culture. Which job would you take?

There it is.

Re: Why Must You Pay Sales People Commissions?

#12

Post by alexasmyths »

Their contribution to revenue is so direct that this kind of bonus can be incentivized in a very valid way.

Engineers at Google get 'bonuses' as well, all of them, so you could very well ask 'why are they paid bonuses'.

If Engineers could be incentivized so directly, I'd imagine they would be.

Re: Why Must You Pay Sales People Commissions?

#13

Post by seanp2k2 »

calinet6 wrote: post #6
ThomPete wrote: post #4

Earlier quoted context omitted.

You have to find a way to measure it though. As long as you can't that it doesn't matter if there are a more holistic way to think about it (my guess is that there are but it requires a lot more data pick-up-point)

Do you though? At an individual level? The only measurement that matters is profit, which is pretty easy to measure.

Hard to AB test and convince MBA types of #showMeTheKPIs

Re: Why Must You Pay Sales People Commissions?

#14

Post by beachy »

calinet6 wrote: post #2

A strong argument would at least consider the systemic consequences of commissions, rather than just extolling the assumed virtues in a circular argument. What is their impact on product? On support? Engineering morale? On the customer experience itself? Just a myriad of effects not even considered here when commissions are looked at in isolation, the system be damned. It's probably very true that it's not plausible…

Maybe it is lazy not to investigate better models than commission.

But on the other hand, the world of enterprise sales, from software to jet planes to insurance, has worked this way for decades/centuries/millenia.

So trying to find a better way is less "not lazy", and more heroically quixotic.

Re: Why Must You Pay Sales People Commissions?

#15

Post by ericfrenkiel »

Sales people earn commission because their work is "non-deterministic," meaning they could execute a perfect sales strategy to win an account but the opportunity could still fall through for circumstances beyond the rep's control (budget is yanked, project is delayed, etc.)

By comparison, an engineer's work is "deterministic" in that is fully under his or her control to complete the goal.

Sales is a risky job and it's compensated accordingly. It doesn't matter if you crushed your numbers 2 quarters ago. It's the reason why there's a saying that a sales rep is always just 6 months out of a job.

Re: Why Must You Pay Sales People Commissions?

#16

Post by JamesBarney »

CEOs tell everyone if you want great CEOs you gotta pay them.

If you wanna great salespeople you gotta pay them.

You want great devs. You should put in a ping pong table and give out free soda.

The myth that great developers aren't interested in compensation is terrible for our collective pay.

Re: Why Must You Pay Sales People Commissions?

#18

Post by calinet6 »

ryanmarsh wrote: post #8

Are there any examples of competitive sales organizations that don't pay commission of some kind?

Not competitive exactly (it's not necessary when you don't have commission) but Pluralsight: https://www.inc.com/aaron-skonnard/why-sales-commissions-don...

Re: Why Must You Pay Sales People Commissions?

#19

Post by [deleted] »

beachy wrote: post #14
calinet6 wrote: post #2

A strong argument would at least consider the systemic consequences of commissions, rather than just extolling the assumed virtues in a circular argument. What is their impact on product? On support? Engineering morale? On the customer experience itself? Just a myriad of effects not even considered here when commissions are looked at in isolation, the system be damned. It's probably very true that it's not plausible…

Maybe it is lazy not to investigate better models than commission. But on the other hand, the world of enterprise sales, from software to jet planes to insurance, has worked this way for decades/centuries/millenia. So trying to find a better way is less "not lazy", and more heroically quixotic.

[deleted]

Re: Why Must You Pay Sales People Commissions?

#20

Post by alttab »

ericfrenkiel wrote: post #15

Sales people earn commission because their work is "non-deterministic," meaning they could execute a perfect sales strategy to win an account but the opportunity could still fall through for circumstances beyond the rep's control (budget is yanked, project is delayed, etc.) By comparison, an engineer's work is "deterministic" in that is fully under his or her control to complete the goal. Sales is a risky job and it'…

> By comparison, an engineer's work is "deterministic" in that is fully under his or her control to complete the goal.

I hope you don't manage engineers.

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