11–20 of 39 posts
Perhaps I’m just not in sales and haven’t seen how complicated it gets. But they start the article with keep it simple and end up with a stepwise function with two different slopes and an excel spreadsheet to calculate it.
Is it simply because the metrics are so obvious (i.e., attribute sales to the salesperson's individual performance), that it's easy compared to other roles?
Is it because sales work is so close to revenue numbers, that more thought has been given to compensation, or it's thought of differently (like CEO comp)?
Is it a belief that the personalities of salespeople in particular are motivated to perform better by the incentive alignment?
Is it because performance-based can be a sweeter deal for high performers, which some historical salespeople managed to secure, and they're not giving it up? (Should SWEs be maneuvering to get "points" on the particular products they worked on, rather than it just being something they can mention when they beg for a promotion?)
Something else?
I get the importance of hitting targets and all, but it seems like horseshit to me that the employee earns no commission between 0-20% of the target, and at 99% of target is at only 80% commission. Maybe someone with more of a sales mindset than I’ve got would thrive on this, but it feels to me a bit like a “heads I win, tails you lose” outcome for the company. Doesn’t really seem like you’d lose the motivating facto…
Perhaps I’m just not in sales and haven’t seen how complicated it gets. But they start the article with keep it simple and end up with a stepwise function with two different slopes and an excel spreadsheet to calculate it.
I get the importance of hitting targets and all, but it seems like horseshit to me that the employee earns no commission between 0-20% of the target, and at 99% of target is at only 80% commission. Maybe someone with more of a sales mindset than I’ve got would thrive on this, but it feels to me a bit like a “heads I win, tails you lose” outcome for the company. Doesn’t really seem like you’d lose the motivating facto…
The author to be blunt, simply does not know what he is talking about and nobody should listen to his advice on structuring comp plans.
You might want to forward his article over to your competitors, though.
Why do sales positions tend to have performance-based compensation when many other roles in the same company are flat salary? Is it simply because the metrics are so obvious (i.e., attribute sales to the salesperson's individual performance), that it's easy compared to other roles? Is it because sales work is so close to revenue numbers, that more thought has been given to compensation, or it's thought of differently…
Why do sales positions tend to have performance-based compensation when many other roles in the same company are flat salary? Is it simply because the metrics are so obvious (i.e., attribute sales to the salesperson's individual performance), that it's easy compared to other roles? Is it because sales work is so close to revenue numbers, that more thought has been given to compensation, or it's thought of differently…
And yes, certain personalities are 100% attracted to sales because of the high earnings potential and the direct correlation between performance and compensation.
Jason Lemkin's blogposts and videos on sales compensation are way more accurate than this.
Why do sales positions tend to have performance-based compensation when many other roles in the same company are flat salary? Is it simply because the metrics are so obvious (i.e., attribute sales to the salesperson's individual performance), that it's easy compared to other roles? Is it because sales work is so close to revenue numbers, that more thought has been given to compensation, or it's thought of differently…
There are industries where sales reps are paid only on commission. The advantage to the company is simple: you don't pay anything to sales reps who don't sell anything. That's where the commission system came from. So, some of this is historical, and, yes the metrics are really obvious. At least the core revenue metric is. But, that's a lagging indicator of performance -- there are endless debates about the leading indicators of sales performance, and none of those are nearly so clear.
Second, most people aren't any good at sales and aren't ever going to be good at sales. The performance distribution is as close to a Pareto distribution as I've ever seen. The sales reps you want -- the ones that bring in 80% of the revenue -- certainly are motivated by "incentive alignment." Actually, they're motivated by being paid enormous sums of money, and they know that if you won't pay them, the competition will.
Third, the sales reps have more leverage than many back-office workers in that their work is very fungible. Or, at least, sales rep believe and act as if they have a lot of leverage. They don't go to school for years or develop deep domain expertise that might not translate to a competitor. They'll happily take their skills elsewhere if they feel there is a better opportunity secure in the knowledge that if you can sell widget a, then you can also sell widget b.
Why do sales positions tend to have performance-based compensation when many other roles in the same company are flat salary? Is it simply because the metrics are so obvious (i.e., attribute sales to the salesperson's individual performance), that it's easy compared to other roles? Is it because sales work is so close to revenue numbers, that more thought has been given to compensation, or it's thought of differently…