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

Re: Why Must You Pay Sales People Commissions?

#121

Post by AstralStorm » Tue, Sep 12, 2017, 5:20 AM UTC

megiddo wrote: post #106

What an enormous echo chamber. I moved from senior dev to sales. My contract is 100% commission, because it aligns performance with business requirements. Good sales is every bit as difficult as good dev, maybe harder. The only people who think devs are not well compensated are devs who can't negotiate or are marginal. If you've never told an interviewer to go fuck themselves over stupid questions or whiteboarding in…

Try negotiating your salary in a corporation, see how well it works, then attempt censure.

People find it easier to up the salary by moving instead of negotiating and it is not due to lack of skill. Otherwise they wouldn't be getting raises that way. You essentially did that by moving to a managerial job. Some people become contractors to expedite this process.

The whole structures are designed to prevent you from negotiating. From useless reasons to not give one a raise like easy to misinterpret and worthless KPI, through bureaucracy preventing even slightly risky projects, office politics, levels of indirection, use of statistics on personal level etc. Even if you are great you may have real trouble showing that you are. So people hop jobs. When hopping, what matters is the resume and salesmanship indeed.

Only very small companies don't have those bureaucracies and instead they cannot just offer you what they don't have. Unless they have huge VC funding, but that can also evaporate bringing it back to job hopping.

Even measuring the effect of your work is difficult, much less selling it, even less so in a way that bypasses all the layers of junk.

Re: Why Must You Pay Sales People Commissions?

#122

Post by AstralStorm » Tue, Sep 12, 2017, 5:33 AM UTC

tucif wrote: post #44

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 rew…

Ooh are we really now. Then why the CEOs and CTOs and especially legals are paid so highly, especially in big companies? They don't risk directly at all. Founders of small companies, sure... If they mess up, the whole company tanks, sure, however they are not paid a commission most of the time.

(Please read The Gervais Principle.)

Re: Why Must You Pay Sales People Commissions?

#123

Post by gersh » Tue, Sep 12, 2017, 5:36 AM UTC

You gotta be careful with commission-based sales people. They will promise the sun, the moon, and anything to close the sale. While this may work for some products, it can lead to pissed off customers.

Commission can encourage a short-term attitude that doesn't consider the long-term relationship with the customer.

Re: Why Must You Pay Sales People Commissions?

#124

Post by chimeracoder » Tue, Sep 12, 2017, 5:37 AM UTC

smallnamespace wrote: post #120

chimeracoder wrote: post #111

Earlier quoted context omitted.

> 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. The problem is not that it's hard to measure. The people is that teachers actually have very little ability to make a marginal impact on their students though their performance, except at the very tail e…

> The problem is not that it's hard to measure. The people is that teachers actually have very little ability to make a marginal impact on their students though their performance, except at the very tail ends of the distribution. That's essentially true for most sales people and traders as well. There are VERY heavy tails -- that one guy at the car dealership who sells 3x as much as his peers, or the trader at Citade…

> That's essentially true for most sales people and traders as well.

It's definitely not true in most sales positions, particularly the ones that are highly commissions-based.

> But imagine how the teaching profession would change if 1) the gains could be accurately measured and 2) we assigned payment or prestige to teachers based on (1).

We can, and we do. The fact is: the gains just aren't that large. If you want to improve student performance, the best place to spend the money isn't by raising teacher salaries.

Re: Why Must You Pay Sales People Commissions?

#125

Post by calinet6 » Tue, Sep 12, 2017, 5:39 AM UTC

tptacek wrote: post #93

calinet6 wrote: post #41

Earlier quoted context omitted.

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."

I've read articles from credible people talking about building commission-less sales cultures and I like the idea. But from experience in a few different companies, one of which involved me directly working with a decent-sized sales team, adverse selection is empirically a major issue. Among the things I feel like I've learned is that the sales people who are most engaged with the product space and can converse most…

That's a much less lazy argument. Horowitz should take notes.

Re: Why Must You Pay Sales People Commissions?

#126

Post by BoiledCabbage » Tue, Sep 12, 2017, 5:43 AM UTC

chimeracoder wrote: post #124

smallnamespace wrote: post #120

Earlier quoted context omitted.

> The problem is not that it's hard to measure. The people is that teachers actually have very little ability to make a marginal impact on their students though their performance, except at the very tail ends of the distribution. That's essentially true for most sales people and traders as well. There are VERY heavy tails -- that one guy at the car dealership who sells 3x as much as his peers, or the trader at Citade…

> That's essentially true for most sales people and traders as well. It's definitely not true in most sales positions, particularly the ones that are highly commissions-based. > But imagine how the teaching profession would change if 1) the gains could be accurately measured and 2) we assigned payment or prestige to teachers based on (1). We can, and we do. The fact is: the gains just aren't that large. If you want t…

> We can, and we do.

Unless you can provide a link, I'm pretty sure whatever you're measuring is very different than what OP was talking about.

And stories abound of the very successful engineer, entrepreneur or scientist whose entire life was changed by one teacher.

Re: Why Must You Pay Sales People Commissions?

#127

Post by terryf » Tue, Sep 12, 2017, 5:44 AM UTC

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…

Sales also has a different culture than development. Sales really is brutal and soul wrenching in a completely different way than software is (yeah, I've been on both sides, less on sales part).

The measurability of money has two sides - one is that you can argue for a commission, the other is that it's very easy to point to numbers that say you didn't really sell anything this month.

In sw dev, if you're mildly competent, you can coast for many months, if not years.

So, essentially it comes down to different risk/reward profiles . Which of course selects for the right kind of people and the cycle feeds itself.

Re: Why Must You Pay Sales People Commissions?

#128

Post by adventured » Tue, Sep 12, 2017, 5:52 AM UTC

ugh123 wrote: post #87

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…

>An engineers actions are so far removed from revenue that they can't make a claim so directly. Really? I see it the other way around. How did the salesperson contribute to building the product? A well built technology solution can sell it self in many scenarios. If we didn't have sales people, we could still build a product and push it into the market. Of course all of this depends on the type of product, but still.…

> A well built technology solution can sell it self in many scenarios. If we didn't have sales people, we could still build a product and push it into the market.

I don't how much sales experience you have, at either the management level or the hands-on sales level, but products almost never sell themselves. You're better off changing that to never sell themselves, because of how rare the examples of it are.

It's practically universally agreed that most companies love to squeeze whatever angles they can for another dollar of profit, particularly around employee costs. So why does sales persevere in such a big way across all companies? They're not doing it for fun, they're not doing it because their products sell themselves, they're not doing it to waste large amounts of money. They do it because they have to, all of them; basically every single company on earth has to sell.

Re: Why Must You Pay Sales People Commissions?

#129

Post by adventured » Tue, Sep 12, 2017, 5:57 AM UTC

mdale wrote: post #117

puranjay wrote: post #103

Earlier quoted context omitted.

You're not going to sell to large businesses without salespeople. A $10/month product? Sure. But when you're selling a $10,000/month product, you need salespeople.

What about AWS ? I often see spend 10k+ Without much of a conversation with salespeople. But this is probably the exception rather then the rule. And of course there is high touch to grow accounts after they reach certain threasholds.

AWS's large clients make up the majority of the AWS business, as is typical in a business like that. AWS has a dedicated sales team that manages those customers.

Here's how that works in concept, for example:

Microsoft didn't hand-sell every individual copy of Windows 95 at every individual retail location. They did sell, big time, at the macro level however, which made the micro sales possible. That's how AWS works, Amazon captures the macro, the micro takes care of itself for the most part. If you're AWS and you capture dozens of impressive start-ups and enterprise players, the headlines and blog posts that are written as a consequence will micro sell as a consequence to countless smaller businesses for you. Not to mention, Amazon simultaneously pushes AWS at small businesses in numerous subtle ways, including on their site (which of course happens to be a giant advertising platform that reaches every business owner in the US).

Re: Why Must You Pay Sales People Commissions?

#130

Post by flukus » Tue, Sep 12, 2017, 6:04 AM UTC

adventured wrote: post #128

ugh123 wrote: post #87

Earlier quoted context omitted.

>An engineers actions are so far removed from revenue that they can't make a claim so directly. Really? I see it the other way around. How did the salesperson contribute to building the product? A well built technology solution can sell it self in many scenarios. If we didn't have sales people, we could still build a product and push it into the market. Of course all of this depends on the type of product, but still.…

> A well built technology solution can sell it self in many scenarios. If we didn't have sales people, we could still build a product and push it into the market. I don't how much sales experience you have, at either the management level or the hands-on sales level, but products almost never sell themselves. You're better off changing that to never sell themselves, because of how rare the examples of it are. It's pra…

I've come across a number of products that sell themselves because they've solved a problem I was having. A lot of these went on to unsell themselves with things like "contact us for pricing". A sales team might be better at maximizing sales, but that isn't necessarily a good thing.

One that's bucked this trend lately has been atlassian, they're a 5 billion dollar company without a sales team that operates in a space that typically requires sales teams. Transparent pricing is a huge part of their success.