Why Must You Pay Sales People Commissions? • Hacker News Board

Re: Why Must You Pay Sales People Commissions?

#41

Post by calinet6 » Tue, Sep 12, 2017, 2:57 AM UTC

tlb wrote: post #26

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…

It's not a circular argument to point out that excellent sales people will take the commission job, while bad sales people will take the salaried job. All the things you mention (support, morale, ...) are second-order considerations -- the first order consideration is getting the best people.

This assumes a specific philosophy of how companies work (good individuals) while an alternative model of good working systems is also effective. A systems view is less dependent on good individuals.

As W. Edwards Deming said, "A bad system beats a good person every time."

Re: Why Must You Pay Sales People Commissions?

#42

Post by jetsnoc » Tue, Sep 12, 2017, 2:57 AM UTC

JamesBarney wrote: post #16

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.

Nailed it. A commission structure is key when it comes to sales and a good one puts all of the right motivators in to all of the right places. It keeps them hungry, selling more, and they are motivated to structure deals and sell the product. Devs, the very best ones, don't want to punch a time clock either and they aren't a production line. We want to build good reliable products that are sold and ultimately used by clients. We too want our company to be competitive and to hit important goals and milestones to become bigger and stronger and compensation tools from management should reflect that. A good balance of 'Smart, Get things Done and Doesn't Jeopardize the entire business by building crap' must be handsomely rewarded and free beer doesn't cut it. It's hard to find those people, but, I know it's hard to find really good sales people too that are interested in selling aggressively, meeting goals but also building sustainable and fruitful relationships with clients instead of building a house of cards. I think startups nail this with the first few hires, they are incredibly critical to get right and they usually get a pretty good amount of stock.

Re: Why Must You Pay Sales People Commissions?

#43

Post by gozur88 » Tue, Sep 12, 2017, 2:58 AM UTC

If you didn't pay commissions sales people would start coasting once they made their numbers. Imagine you have to make a million on sales per quarter, and three weeks in you strike gold in the form of a $1.1m contract.

Sure, you get bonuses for exceeding your numbers, but you could spend the next two months slacking off, which would probably be worth the lost income.

Worse, from the company's perspective, you might try to make sure your new prospects don't close until next quarter, just as a little bit of insurance in case it turns out to be leaner than this one. You're already drinking the coffee - what's the rush?

Sales is a tough job. It's a lot of travel, a lot of rejection, and a lot of stress. If I had to do sales you can be damn sure I would expect a lot of compensation.

Re: Why Must You Pay Sales People Commissions?

#44

Post by tucif » Tue, Sep 12, 2017, 2:58 AM UTC

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'…

I think the whole (non)deterministic thing is off.

Engineers could also execute a perfect development strategy to deliver a product and it could fail through for circumstances beyond engineering team (budget is yanked, project is delayed, etc.)

But I do agree sales is more risky as it is the "last-mile" of the business and they have a target to make, so it's their neck on the line and we live in a system where we reward how much neck someone is sticking out and yet survives, rather than work performed on the backstage. Same thing applies for C-level compensation.

Re: Why Must You Pay Sales People Commissions?

#45

Post by iaabtpbtpnn » Tue, Sep 12, 2017, 2:59 AM UTC

ericfrenkiel wrote: post #33

alttab wrote: post #20

Earlier quoted context omitted.

> 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.

Having empathy for fields outside your own is exactly why this article is written. It sounds like you only have a single perspective, which is fine, but having more perspectives would help you move beyond being so rigid in your thinking.

The parent didn't display any rigidity of thinking, they simply criticized your inaccurate characterization of engineering work... a point which your non sequitur reply does not address.

Re: Why Must You Pay Sales People Commissions?

#46

Post by Chiba-City » Tue, Sep 12, 2017, 3:00 AM UTC

Salespeople also come in tiers with overlapping recruits and cattle calls. The recruits get bigger or quicker commissions on "who-they-know." Some cattle call younger salespeople find a mentor or get lucky. But attrition rates are high. I brought in IBM fed sales head for a talk years back. IBM only adjusted base salaries once around 1974 or so. They just let them die on the vines otherwise when sales go down.

Re: Why Must You Pay Sales People Commissions?

#47

Post by sidlls » Tue, Sep 12, 2017, 3:01 AM UTC

caf wrote: post #36

sidlls wrote: post #5

I like how he inadvertently admits that engineers are compensated less well in part because they mistake their jobs for something fun they'd do anyway.

Commission or Salary is orthogonal to Well Compensated and Badly Compensated. Those students selling paintball packages in the mall are paid on commission, but they sure aren't being paid well. (The article isn't "why sales people are paid a lot", it's about why their pay structure is based on a commission structure).

Sure, but in the context of this article engineer style compensation compares poorly. That is, it's essentially a statement that engineers aren't compensated as well as sales workers, and one of the reasons given as to why that's possible is because engineers "have fun" doing engineering work even outside their jobs.

Re: Why Must You Pay Sales People Commissions?

#48

Post by freyir » Tue, Sep 12, 2017, 3:03 AM UTC

ericfrenkiel wrote: post #33

alttab wrote: post #20

Earlier quoted context omitted.

> 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.

Having empathy for fields outside your own is exactly why this article is written. It sounds like you only have a single perspective, which is fine, but having more perspectives would help you move beyond being so rigid in your thinking.

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

It sounds like you only have a single perspective, which is fine, but having more perspectives would help you move beyond being so rigid in your thinking.

Re: Why Must You Pay Sales People Commissions?

#49

Post by unabridged » Tue, Sep 12, 2017, 3:05 AM UTC

idlewords wrote: post #35

unabridged wrote: post #28

It comes down to quality of product vs competitors. Where you have a very in demand brand, you can get away with no sales people (eg Telsa). In a field where your products are indistinguishable from competitors, you need to pay for sales people. And in field where your product is probably worse than cheaper (or free) alternatives, you have a company entirely made of sales people (eg Oracle)

Tesla has a sales team, you're just not looking in the right place. Their sales team works with investors, and sells them on a story.

Definitely but I think goes into the marketing/advertising category. But either way almost every other car company has an end sales person used to jack up the price, while tesla can sell cars at a fixed price off a website. And this is solely because of the perceived quality of the product.

Re: Why Must You Pay Sales People Commissions?

#50

Post by dingo_bat » Tue, Sep 12, 2017, 3:07 AM UTC

Waterluvian wrote: post #7

phkahler wrote: post #3

Why do sales people get commissions and engineers don't? Because the sales person knows exactly how much money they bring in and can claim "if I didn't make the sale, that money would not be coming in" even though it's not always true it's a good story. An engineers actions are so far removed from revenue that they can't make a claim so directly. Also, if they did want to claim a portion of product revenue they could…

Also personality. Good salespeople are... Good salespeople. They apply their craft when negotiating compensation. What am I going to do, make a single page app about why I should be paid more? ...actually that's not a bad idea.

> single page app about why I should be paid more?

Isn't that a resume?