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Why Must You Pay Sales People Commissions?

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Re: Why Must You Pay Sales People Commissions?

#261

Post by tensor »

peteretep wrote: post #160
tensor wrote: post #101

I suspect that developers are not so much upset at salespeople getting commission, but rather why they get paid so much compared to developers. Personally I don't buy that sales skills are so much more difficult to find or are in higher demand than software development skills. Some of the difference in equity certainly has to do with the higher risk of getting fired for poor performance in sales. But beyond that it's…

> I don't buy that sales > skills are so much more > difficult to find or are in > higher demand than software > development skills Sure, and sales people don't understand why the entire engineering function of the company can't be done on eLance for $10/hr. We can talk about 10x developers all we like, but if you sit in a sales meeting of many companies you'll find there are 10x sales people whose presence is easily…

There may or may not be 10x employees in either camp, though I don't quite see what that has to do with the income difference. Should a 10x salesperson earn three times what a 10x developer earns? If so why?

Re: Why Must You Pay Sales People Commissions?

#262

Post by daladd »

rbcgerard wrote: post #251
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…

Not sure where the idea comes from that teachers are poorly compensated. Relative to some other professions yes, but hardly a low Paying job. Annual teacher salary in California is $73k/year [1] divided by .75 is $97k/year with generous pension an medical benefits that probably push that number up $25k-$75k/year... [1] http://www.cde.ca.gov/fg/fr/sa/cefavgsalaries.asp

I'm curious why you would divide by .75 there (?)

Re: Why Must You Pay Sales People Commissions?

#263

Post by AndrewKemendo »

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.

I don't think this is actually true - and in fact I'm loathe to come up with any examples where it was the case. In some cases fewer active sales efforts are required, if the product is really perfect, but even those are exceptionally rare and generally are utilizing pre-existing networks where the high touch process is already done.

Re: Why Must You Pay Sales People Commissions?

#264

Post by alien_at_work »

wiz21c wrote: post #190
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 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 pe…

I don't understand what you're saying here at all. Are you under the impression that money someone needs to live has something to do with compensation? Labor is a market like any other. A sales salary has nothing to do with how much a sales person needs to live but rather perceived value of a sales role.

In my personal experience, sales people tended to have higher salaries along with strong commission.

Maybe your comment is constrained by your idea that revenue is shared equally between engineers and sales people, but why would that be the case?

Re: Why Must You Pay Sales People Commissions?

#265

Post by The_DaveG »

Solid article, there is a middle ground that is missing, that or a base plus bonus of the team. Some of the best sales teams I've ever know work based off a bonus for the whole company meaning they have a huge incentive to help the other members of the team get better and collaborate for the betterment of the company.

This will create the best sales team, but will not attract the top X% of sales people.

Re: Why Must You Pay Sales People Commissions?

#266

Post by noahl »

rayiner wrote: post #249
hacking_again wrote: post #246

Earlier quoted context omitted.

All of it? None of it? Teachers themselves don't add value, teachers enable value addition.

I mean, obviously everyone adds value (from janitors up to doctors). And my person view is that all jobs should be compensated at the same hourly rate. But is there anything special about teachers? Like if they all quit society would go to hell, but that’s true of garbagemen and road workers too. The question is, does it matter who does the job?

Yes, it matters who does the job. Good teachers have measurably better effects on students than bad ones. Here's one essay with a lot of statistics: http://www.nytimes.com/2012/01/12/opinion/kristof-the-value-... . I also remember hearing a few years ago that a good teacher can teach about twice as much in a year as an average teacher, but I'm not sure if that's the same as the 40% number from this article or something else.

The effect is an especially big deal in math, because it is so cumulative. One of the worst things that can happen to a student is to have a bad math experience (whether it's the teacher, the other kids in the class, or whatever) one year, and then have future teachers never go back and cover the same material. That leaves students with permanent gaps in their knowledge, which hurts them later on.

Re: Why Must You Pay Sales People Commissions?

#267

Post by selectodude »

boomboomsubban wrote: post #254
aj7 wrote: post #200

Earlier quoted context omitted.

250k lifetime? So he should get another $6k. Teachers and engineers don't work for money. And there are often bad consequences for people who "don't work for money." I worked in sales so I could afford to be an engineer later. There were plenty of ex-teachers in sales. They did well.

Replacing one teacher in the bottom 5% with an average one got the student $250k more over their lifetime. So the average teacher is generating around $135,000 more than the poor teacher. And equating teachers to engineers makes no sense, I've met dozens of people in some engineering school to make money.

That seems questionable. In a lot of school systems, the best teacher may be the difference between a kid ending up in jail or not, but kids that are flirting with that line aren't going to be particularly successful on aggregate. And American society loves sending black kids to jail. So, what's the value add there?

It's so much more complex than that.

Re: Why Must You Pay Sales People Commissions?

#268

Post by selectodude »

daladd wrote: post #262
rbcgerard wrote: post #251

Earlier quoted context omitted.

Not sure where the idea comes from that teachers are poorly compensated. Relative to some other professions yes, but hardly a low Paying job. Annual teacher salary in California is $73k/year [1] divided by .75 is $97k/year with generous pension an medical benefits that probably push that number up $25k-$75k/year... [1] http://www.cde.ca.gov/fg/fr/sa/cefavgsalaries.asp

I'm curious why you would divide by .75 there (?)

Public sector salary pre-tax income is usually only 66-75 percent of total comp after adjusting for health insurance and pensions.

Re: Why Must You Pay Sales People Commissions?

#269

Post by Eridrus »

brianwawok wrote: post #233
Eridrus wrote: post #230

Earlier quoted context omitted.

A coworker once suggested to our CTO that we should get bonuses as a % of the money we save by optimising our AWS costs. I was super on board with that plan at the time since I had been thinking about an unmaintained system and had figured out we could shave off a huge chunk of storage saving us 20k/month with no impact on functionality, and I got the change deployed. Instead of a bonus I got laid off a few months af…

Is there a reverse incentive here? *IF we bloat AWS costs for 1 year, then at year end find a way to cut 50k.. bam, big bonus? Maybe if the adding to AWS cost team is a different team from the lowering cost team...

I'm not saying this is a good metric, just relaying an anecdote :)

Re: Why Must You Pay Sales People Commissions?

#270

Post by k__ »

peteretep wrote: post #160
tensor wrote: post #101

I suspect that developers are not so much upset at salespeople getting commission, but rather why they get paid so much compared to developers. Personally I don't buy that sales skills are so much more difficult to find or are in higher demand than software development skills. Some of the difference in equity certainly has to do with the higher risk of getting fired for poor performance in sales. But beyond that it's…

> I don't buy that sales > skills are so much more > difficult to find or are in > higher demand than software > development skills Sure, and sales people don't understand why the entire engineering function of the company can't be done on eLance for $10/hr. We can talk about 10x developers all we like, but if you sit in a sales meeting of many companies you'll find there are 10x sales people whose presence is easily…

I think hiring sales is much more of a lottery than hiring engineers.
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