I could go on and on about how my company screws this up. First, even though they get commission they also get large base pay despite a salesmans performance which makes the salesman stop working around making 70k a year, second horrible tracking of what the deal in each contract will cost our company in developer hours and hardware etc etc so they get paid full commission on a $20,000 that ends up being $4,000 revenue. What our company needs is a strict standard but it's a endless loop of oh salesman can make a sale if you can create this so stop what you are building and welcome to the chaos.
Why Must You Pay Sales People Commissions?
181–190 of 327 posts
Re: Why Must You Pay Sales People Commissions?
#182Earlier quoted context omitted.
At the end of the day, a salesperson not making quota is going to be fired. The best salesperson in the world could maybe buy themselves an extra year, at best. But eventually, if they're so great, where are the numbers? And their next job search isn't gonna look so great. They can't solve a problem on a whiteboard to make up for the fact that their prior business was a bad fit for the market, or whatever. A salesper…
Do bad engineers not get fired?
depends. often the meritocracy of performance reviews is skewed by extroversion and pleasantness of a person toward management, which doesn't have much of a way to judge real skill unless form a technical background and actively working on the codebase.
Re: Why Must You Pay Sales People Commissions?
#183I have seen one scenario where engineers get sales commissions: quants in investment banks. Typically in banks traders will get 3% of PnL before costs are stripped out, or 10% after costs. Traditional sector coverage sales will get a volume based commission. This always leads to tension between sales and trading as one is compensated on volume and the other on margin. Etrading sales get sales credits on channel volume, not sector volume, which is often another source of tension. And finally, the quants coding up new pricing models may get sales credits on trades priced with those models. No doubt there are some interesting comp models at automated or systematic trading hedge funds where there's no real distinction between traders and coders, but I have no first hand experience there.
Re: Why Must You Pay Sales People Commissions?
#184I'd rather have a sales person that is as much a part of the team as anyone else.
Daniel Pink's ["To Sell Is Human"](http://www.danpink.com/books/to-sell-is-human/) makes a strong argument against commissions, which is echoed in these articles:
https://hbr.org/2012/07/a-radical-prescription-for-sales
> Mitch Little began questioning the received wisdom on sales commissions in the late 1990s, shortly before he became vice president for worldwide sales and applications at Microchip Technology, a large semiconductor company headquartered near Phoenix. He oversaw 400 salespeople whose compensation plan was the industry standard—60% base salary, 40% commissions.
> “That made sense 40 years ago, when the Fuller Brush salesman went door-to-door,” Little told me. “But the world of business-to-business sales has shifted fundamentally.” So in an act of sacrilege for a onetime sales guy, Little killed commissions altogether. He established a new plan in which salespeople received 90% of their compensation in a high base salary, and the other 10% was linked to corporate (rather than individual) measures such as top-line growth, profits, and earnings per share.
> The result? Total sales increased. The cost of sales stayed the same. Attrition dropped. Retention rose.
http://www.nytimes.com/2013/11/21/business/smallbusiness/for...
> The proponents of ditching commissions believe they foster negative behaviors, such as focusing on an individual’s profit over the company’s, emphasizing short-term outcomes and encouraging unproductive competition among sales representatives. Even companies that pay commissions can face costly turnover as representatives chase more lucrative offers.
https://blog.fogcreek.com/why-do-we-pay-sales-commissions/
> In the year since we dropped the commission system our sales have gone up. In fact, four of the last five months have been record months. We can’t reasonably say that our record sales were caused by this change, but we can reasonably say it didn’t hurt, and that’s worth having a hard think about in your own company. There is no guarantee that this will work for everyone, but it’s unlikely to be a disaster either.
> Our salespeople all estimated that they were spending about 20% of their time just keeping track of what money was due them. There was constant horse trading. And, most worrying, we created a heavy disincentive to do all the service stuff that makes customer service shine. Why would you want a system that sets up after-sales service as competition against new sales, especially if you have a small sales team? Reputation and retention, after all, are both paths to revenue.
> Removing commissions has changed the sales team. It has taken their focus off their compensation. They have all that administration time back for more useful things. They take a longer view of the value of a prospect, and are less worried about who is going to buy right now. They feel less stress about taking vacation. They don’t quibble among themselves over accounts. And best of all, they feel more integrated with the company.
Re: Why Must You Pay Sales People Commissions?
#185Why 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…
As an engineer, the way you get paid for the value you create is by starting a company. In fact, that's the way you do it in pretty much every profession.
The only difference between the guy who owns a successful Veterinary practice and the guy working as an underpaid veterinarian is that one of them went out and leased some office space.
Re: Why Must You Pay Sales People Commissions?
#186Why 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"
This statement is simply not true in my experience as an engineer in the tech industry for over 15 years. Sell a bad product 'once', and the sales person 'ability' to sell it again will decrease. Sales people ultimately sell a project and its features, interpreted by engineers. You must incentivise an engineer to be creative, write better features and good code or you run the risk of having something that destroys a sales person reputation along with the companies revenue!
Re: Why Must You Pay Sales People Commissions?
#187I have feeling sales people have too much leverage in general.
Almost every company I worked for had a sales CEO. God, they are software companies! All the successful software companies have engineers as CEOs...
Re: Why Must You Pay Sales People Commissions?
#188Interesting last comment (from November 2016) to the original article: " Important Update * I am currently employed at Pluralsight, and I feel obligated to point out that the author of this article, our CEO, no longer believes or stands behind any of the content in this article. Pluralsight does not operate under the Deming philosophy. As of January 2017, Pluralsight will be implementing sales commissions again. We h…
I'm confused why you think the old Pluralsight comment is relevant to this article:
1) The author Ben Horowitz is a VC and not the CEO of Pluralsight.
2) The article explains the psychology & incentives for sales commissions instead of advising companies to pay their salespeople zero commissions.
Re: Why Must You Pay Sales People Commissions?
#189Interesting last comment (from November 2016) to the original article: " Important Update * I am currently employed at Pluralsight, and I feel obligated to point out that the author of this article, our CEO, no longer believes or stands behind any of the content in this article. Pluralsight does not operate under the Deming philosophy. As of January 2017, Pluralsight will be implementing sales commissions again. We h…
Weird. Have I misread it? It seems like the blog post is exactly supporting that statement: You need to pay commissions to sales people.
Re: Why Must You Pay Sales People Commissions?
#190Why 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 money the sales person needs to live is probably the same as the engineer. Therefore, if sales people get commission, then their salary must be set lower than the engineer so that on average (that is, when the ratio between actual sales and missed sales is average), they earn the same thing as the engineer. (this in a context where the added value by the company is equally shared between the engineer and sales people)