Theme: Incentives

ON COMMISSIONS FOR SALESPEOPLE: GOOD OR BAD?

In the “commissions work vs commissions don’t work” argument, I look at the problem this way:

1) Commissions are either unproductive, or completely fraudulent in attempts to sell uncompetitive products and services.

2) Commissions (or bonuses) are productive for distributing effort between product and service lines. In other words, setting priorities in the attainment of results, not producing results in and of themselves.

3) Commissions very often produce behavior not in the customer interest.

4) Commissions are a good way of ‘hiding’ very high salaries.

5) In my experience salaries must be sufficient and commissions must be bonuses for going the extra mile, not necessities.

6) Businesses vary between few customers retained for years, and many customers retained for a single transaction. Commissions produced short sighted behavior in long term relationships. They are really just a way of justifying the high salary that salespeople who manage high revenue accounts deserve.

7) As a CEO and Sales Manager I tend to look at every opportunity by it’s total portfolio value, and I try to maintain a revenue stream. I prefer to teach people to do the same.

(personally, I have found that they make zero difference in my behavior since I do not change my behavior at all. I will kill it if I can and not waste time on it if I can’t. All commissions do is cloud my judgement. )