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Why Must You Pay Sales People Commissions?

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Re: Why Must You Pay Sales People Commissions?

#61

Post by savanaly »

To me, it is obvious why sales people are paid by commission. It's because the most efficient thing for a company to do is pay someone their precise marginal value, not more or less, as that leads to the incentive of people doing the best they can given special constraints that only they personally know such as their own personal productivity function and how much they value their own time and effort.

Companies would do similarly for managers and engineers if there were a discreet non-gameable measurement of their output (I'm sure you don't need much imagination to see why paying per JIRA task completed wouldn't work). Unfortunately there's no such measurement system, so the best solution companies have found so far is pay them a salary and try to incentivize effort through bonuses, raises or promotions.

Re: Why Must You Pay Sales People Commissions?

#62

Post by caf »

gozur88 wrote: post #43

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 t…

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.

This has a name in sales - "sandbagging".

Re: Why Must You Pay Sales People Commissions?

#63

Post by richdougherty »

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…

> the sales person knows exactly how much money they bring in

I agree this is the key factor. Any job where a person can argue a clear, direct, measurable link between their work and profit is a job that can be paid based on financial results. Other jobs where you see this: financial traders, consultants with direct client contact.

To take the other extreme, look at teachers. They have the potential to generate huge value based on how effectively they develop society's human capital. Unfortunately the effects of a single teacher are so noisy and indirect that it's basically impossible to measure their performance. The lack of firm data is why the debate about teacher compensation is so fraught.

Re: Why Must You Pay Sales People Commissions?

#64

Post by rokhayakebe »

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.

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

It really does not matter what people think. Set your price, hustle and be patient. The price for engineers is set by other engineers who are willing to work for less.

Re: Why Must You Pay Sales People Commissions?

#65

Post by Fordrus »

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.

When I was still in the humanities (German Literature Major), my program was making a MAJOR push for all graduates of the major to be able to articulate to others and interviewers the skillset they'd gained during their time at university, and I found it quite useful and helpful, even though I can't remember too much about the specifics.

I even talked to one of my professors personally about the push, in which I mentioned how the humanities in general are not amazing at 'selling' their contribution to human progress (she enthusiastically agreed - this was a sign that some of us were 'getting it') - part of that deficiency shows is via the incredible antipathy the internet holds towards the Literature major who then becomes a starbucks barista.

I don't always love salespeople, and I often chafe at the thought of having to emphasize my own efforts in an attempt to gain leverage with those of higher status than myself (a situation known to some as 'playing politics') - yet salesmanship is literally universal to the human condition (really want yammer more and explain what I mean by that, but it is time to shutdown for the day. :) )

Re: Why Must You Pay Sales People Commissions?

#66

Post by dragonwriter »

RcouF1uZ4gsC wrote: post #54
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.

You don't see CEO's being CEO's in their free time. Nor do you see sales people selling stuff just for the fun of it. With open source, developers will spend time and effort building very valuable stuff for free. This perpetuates the perception that programmers like programming so much they would do it as long as their living expenses are met. I honestly think open source has depressed the wages of programmers. Linux…

> You don't see CEO's being CEO's in their free time.

Of, say, nonprofit labor-of-love side projects, which they sometimes end up leaving their for-profit CEO gig for, sure I do.

Re: Why Must You Pay Sales People Commissions?

#67

Post by Yhippa »

RcouF1uZ4gsC wrote: post #54
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.

You don't see CEO's being CEO's in their free time. Nor do you see sales people selling stuff just for the fun of it. With open source, developers will spend time and effort building very valuable stuff for free. This perpetuates the perception that programmers like programming so much they would do it as long as their living expenses are met. I honestly think open source has depressed the wages of programmers. Linux…

It's interesting; in the past companies were afraid of open source because some of it had no direct support, you couldn't yell at someone if something goes wrong, and "how can you trust something you just downloaded from the internet?"

Now I see private and government organizations mandating the use of open source because it's mostly functional and most importantly, it's free (as in beer).

Re: Why Must You Pay Sales People Commissions?

#68

Post by blhack »

RcouF1uZ4gsC wrote: post #54
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.

You don't see CEO's being CEO's in their free time. Nor do you see sales people selling stuff just for the fun of it. With open source, developers will spend time and effort building very valuable stuff for free. This perpetuates the perception that programmers like programming so much they would do it as long as their living expenses are met. I honestly think open source has depressed the wages of programmers. Linux…

>You don't see CEO's being CEO's in their free time.

Every single successful business leader I know[1] is a leader at more than just their business. They also sit on charity boards, sit near the top of their social circles etc.

We as devs have to get over this adversarial relationship with other departments. Sales people, business people, accounting, etc. aren't really that different than engineering.

[1]: It's frustrating to me that "CEO" seems to have morphed into a generic term that means "business leader".

Re: Why Must You Pay Sales People Commissions?

#69

Post by hamandcheese »

RcouF1uZ4gsC wrote: post #54
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.

You don't see CEO's being CEO's in their free time. Nor do you see sales people selling stuff just for the fun of it. With open source, developers will spend time and effort building very valuable stuff for free. This perpetuates the perception that programmers like programming so much they would do it as long as their living expenses are met. I honestly think open source has depressed the wages of programmers. Linux…

> I honestly think open source has depressed the wages of programmers.

I strongly disagree. Linux and many other amazing open source projects have helped build a tremendous amount of software products leading to the incredibly high demand for tech workers we see today. Good open source software lets smaller players enter the game, standing on the shoulders of giants. See: Rails

Re: Why Must You Pay Sales People Commissions?

#70

Post by trumpsupporter3 »

And this is supposed to be a revelation? Question to all the engineers reading this: how do you think the money that goes to your bank account gets to your employer first? And what do you think would happen to your job if money stopped flowing from customers to your company?
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