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

Re: Why Must You Pay Sales People Commissions?

#161

Post by matwood » Tue, Sep 12, 2017, 7:54 AM UTC

0xbear wrote: post #102

alexasmyths wrote: post #12

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.

Google actually had to dial down the bonuses circa 2011. For one thing, to keep the comp looking competitive, it makes sense to have a larger component, because until this rebalancing bases were unimpressive there. For another too large a bonus creates more competition than one would like in the engineering discipline, where the overall success depends on people working well together. So they just cut the bonus in ha…

I’ve personally seen this in action, and it leads to all sorts of issues in engineering where the team output is really what matters.

Re: Why Must You Pay Sales People Commissions?

#162

Post by peteretep » Tue, Sep 12, 2017, 7:54 AM UTC

scarface74 wrote: post #112

savanaly wrote: post #61

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…

Companies would do similarly for managers and engineers if there were a discreet non-gameable measurement of their output The sales process is gameable especially in software. The salesperson can sell vaporware and promise the customer that the company can deliver. That puts pressure on software development to work overtime - unpaid - to meet the deadline.

This can be easily worked around. In a previous CTO role we started talking about development costs coming out of sales commissions, and the problem went away.

Re: Why Must You Pay Sales People Commissions?

#163

Post by [deleted] » Tue, Sep 12, 2017, 8:05 AM UTC

richdougherty wrote: post #136

richdougherty wrote: post #63

Earlier quoted context omitted.

> 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…

I'll just put one citation into this discussion. Raj Chetty and his collaborators produce amazing research. I attended a talk when he visited New Zealand a few years ago. In this paper he's attempting to address the dream of measuring teacher value, by measuring changes in test scores against changes in lifetime income. Yes there are other ways of measuring teacher "value" too, but income changes are relevant to this…

[deleted]

Re: Why Must You Pay Sales People Commissions?

#164

Post by staunch » Tue, Sep 12, 2017, 8:05 AM UTC

Why? Because sales people are good at sales! Their whole job is negotiating the highest possible compensation for the value they provide.

Apple doesn't need sales people to move millions of their products into "the Enterprise," and neither does any other company with products as good as theirs.

It's just that most companies make shitty "Enterprise software" and then try to push it with aggressive sales tactics.

There's more than one way to succeed, and making great products is a lot more interesting than a cocaine-powered salesforce.

Re: Why Must You Pay Sales People Commissions?

#165

Post by probablybroken » Tue, Sep 12, 2017, 8:12 AM UTC

ryandrake wrote: post #115

I wonder what an org would look like where engineers got compensated as well as salespeople--as a percentage of sales, where if you made a great product that sold like gangbusters, you got showered with money, but if it doesn't sell you get very little or fired. I bet at the very least the products would look very, very different.

It could also lead to a too many chefs situation, since every contributor would have a steak in the outcome.

Re: Why Must You Pay Sales People Commissions?

#166

Post by cerebrum » Tue, Sep 12, 2017, 8:13 AM UTC

I would be interested in an experiment. Do sales with comission and without and compare the results. Also consider that without having to pay comission you could hire more salespeople for the comissionless model.

I bet that there should not be a significant difference in the amount you are selling.

Re: Why Must You Pay Sales People Commissions?

#167

Post by Fordrus » Tue, Sep 12, 2017, 8:15 AM UTC

0xbear wrote: post #91

Fordrus wrote: post #65

Earlier quoted context omitted.

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 ment…

Out of curiosity, what career path did you end up pursuing?

Short story: from German Literature to Neuroscience, after a family member was diagnosed with mental illness. Once In Neuroscience, almost literally no research questions I was interested in could be answered without substantial computer science expertise, started taking compsci courses and ABSOLUTELY LOVED THEM. And thus: Bioinformatics!

Well, ah, I'm paused at the moment, my wife got semi-unexpectedly pregnant after quite a number of years unsuccessfully trying to do so - she is a salesperson and makes more than me (I was an intern at a genomics startup at the time) so I am being the dad, finishing school, and working on side projects while we map out what we do next - We're planning on swapping roles as soon as I'm finished with school and it's otherwise workable. That does mean I'm focusing more on programming than the data science/bioinformatics side of things, but I'll keep my eyes open for opportunities there too, never know exactly what will happen. Also, the baby is totally amazing, and I adore being his Dad, seriously, I wish stay home dads were a much more common thing than we are, it's freaking fantastic, makes me wish things worked differently to facilitate a pair of parents staying home with anc raising a child as their primary function. :)

Re: Why Must You Pay Sales People Commissions?

#168

Post by johannes1234321 » Tue, Sep 12, 2017, 8:20 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…

From a company's perspective the nice thing there is that they can push some risk to the sales people. If they build a shotty product nobody wants the sales people earn less, while not being responsible ...

Re: Why Must You Pay Sales People Commissions?

#169

Post by blubb-fish » Tue, Sep 12, 2017, 8:23 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…

They are also closer to management - having drinks with higher ups and important customers, going to events. They tend to be more fun to be around and in a better mood. I'm an engineer and I am really not happy about this industry habit. I think it is simply not fair.

Re: Why Must You Pay Sales People Commissions?

#170

Post by arximboldi » Tue, Sep 12, 2017, 8:23 AM UTC

gozur88 wrote: post #132

tptacek wrote: post #97

Earlier quoted context omitted.

The theory of not paying commissions is that salespeople will be incentivized the same way other employees are. You don't code on commission and tend not to coast once a revenue number is hit.

I've met quite a few software developers who pad their estimates heavily and then coast when the job is complete.

Which is great for everyone. The company gets predictable estimates, the developer gets a stress-free life. A shorter but unmet deadline is worse for everyone, specially the company, even if the product is still delivered sooner than the padded deadline.