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To Commission or Not to Commission

Interesting story from Fog Creek about getting rid of sales commissions:

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.

I’ve been spending a lot of time lately thinking about how you build a structure for teams to succeed. Part of that structure is salary (there are lots of other parts as well). We’re trying to figure out a system that makes the most sense for the sort of company we’re trying to build and, in turn, trying to look at accepted practices with a skeptical eye. (As an aside, I’ve also been reading the Management Myth, which explains how management consulting came to be). Anyhow, no real conclusions, but glad to see others thinking about this as well.

January 4, 2012 // This post is about: ,

Comments

  • Ian Sohn says:

    I’d say tracking commission is probably debilitating if you have people closing a lot of small deals. But if your sales/biz dev team is making more predictable, long-term, sizable deals, then tracking commission is easy.

    I think it’s a smart incentive. Not at the risk of inefficient behavior. But a way to share upside and reward smarts, hustle and hell, maybe even a little luck.

  • Elenor says:

    Read Daniel Pink’s DRIVE – you won’t ever pay a bonus or commission again.

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