Why do we pay sales commissions?
blog.fogcreek.com
Why do we pay sales commissions?
1–10 of 119 posts
Re: Why do we pay sales commissions?
#2I will tell you, for anyone who actually helps to build the selling product, there is nothing worse than watching a salesperson completely oversell a project, walk away with a fat check, and you are left holding the bag and working overtime.
Re: Why do we pay sales commissions?
#3Our company does not have commissioned reps either, and frankly, I'm not complaining. Our sales figures are fine.
Re: Why do we pay sales commissions?
#4I remember some years ago talking to the CEO of a company that was doing a great job of selling to us - I mean way over expectations - fantastic.
I asked - how much are you paying that guy - he is great? the answer was - "an OK salary" - but they did find out what motivated him - for this guy it was vacation time.
Everyone wants a salary that reflects their worth in a business - then (for peak performance) everyone might have different motivators. It might be recognition, a great car, a better office - it does not matter - find out what it is and supply it...
Re: Why do we pay sales commissions?
#5But surely all the logic applied here to commissions also applies to quotas, right? (measuring performance, assigning credit to a sale to a particular sales rep, dividing up territories equitably, etc) But the post doesn't mention eliminating quotas. Wouldn't they go hand in hand? Can you have a sales force without quotas?
Re: Why do we pay sales commissions?
#6I will tell you, for anyone who actually helps to build the selling product, there is nothing worse than watching a salesperson completely oversell a project, walk away with a fat check, and you are left holding the bag and working overtime.
I can think of something worse: being the customer.
I had to integrate an existing system with a product sporting a 7 figure price tag. Most painful part involved dealing with disinterested engineers who brushed off our unmet requirements as "Blame the salesman."
The entire company deserves blame and the engineers should be fighting for better sales standards if they don't want to put the work in.
Re: Why do we pay sales commissions?
#7But surely all the logic applied here to commissions also applies to quotas, right? (measuring performance, assigning credit to a sale to a particular sales rep, dividing up territories equitably, etc) But the post doesn't mention eliminating quotas. Wouldn't they go hand in hand? Can you have a sales force without quotas?
Someone else from Fog Creek can correct me if I'm wrong here, but I believe our sales team has a quota, but the individuals don't really. This way, they're all helping each other to reach the team quota, instead of possibly working against each other in order to hit their own quotas.
Re: Why do we pay sales commissions?
#8...and are less worried about who is going to buy right now...
So you implemented a system that makes people less worried about the most important thing to worry about?
OP makes many fine arguments about the pros and cons of commissions, but this one little nit trumps them all.
There are many reasons for businesses to suffer and eventually die: capitalization, profitability, positioning, etc. but insufficient revenue is the biggest poison of them all.
I always thought of revenue as the water level in a creek. Enough covers all the ugly rocks below. Insufficient exposes all other weaknesses.
It sounds like Fogcreek must be doing rather well for this to work and I'm happy for them. But it makes me wonder: if revenue ever starts failing to meet projections, how soon will commissions be re-instituted to stop the bleeding?
[EDIT: Some of the replies below imply that I overlooked the words "right now", but that was exactly my point: like oxygen, "who is going to buy right now" is the most important thing to worry about. Enlightened organizations may be able to ascend Maslov's Hierarchy of Needs, but as soon as sales people worry less about Level 1: Revenue Right Now, I begin to worry.]
Re: Why do we pay sales commissions?
#9...and are less worried about who is going to buy right now... So you implemented a system that makes people less worried about the most important thing to worry about? OP makes many fine arguments about the pros and cons of commissions, but this one little nit trumps them all. There are many reasons for businesses to suffer and eventually die: capitalization, profitability, positioning, etc. but insufficient revenue…
The emphasis is on right now. We definitely care who buys, but without commissions, there's a lot less pressure to get them to buy right now. That helps us get better customers because we take the time to answer their questions and help show them how our products can solve problems for them.
In the long run, this is a much better situation for us. The customers are, on average, happier, which means they keep coming back, they recommend us, and they need less support.
Re: Why do we pay sales commissions?
#10...and are less worried about who is going to buy right now... So you implemented a system that makes people less worried about the most important thing to worry about? OP makes many fine arguments about the pros and cons of commissions, but this one little nit trumps them all. There are many reasons for businesses to suffer and eventually die: capitalization, profitability, positioning, etc. but insufficient revenue…
Apparently, they've had "record months" since implementing this system.