It Is Time to Eliminate Sales Commissions
Crazy quotas. Anything to close a deal. Pushing customers no matter the cost. If you are a regular reader of this blog, you already know how I feel about the traditional approach to sales. Customers have changed, yet the selling process has not. But here is a surprise — I am about to come to the defense of salespeople everywhere.
It is foolish to think that salespeople are coin-operated machines, brains filled with nothing but the sound of ‘ka-ching!’
In a blog post about why companies must pay sales a commission, Ben Horowitz referenced an old boxing saying — that there is “no prize fight without the prize.” He used this saying to make the leap that without a commission, companies cannot fairly motivate someone in sales to be their best.
Of course, this is wrong. Think about it. There are only a few big prize fights every year, but plenty of boxing happens. Most of it is done by amateurs who love to flex their skill, compete, and (yes) win the fight. If the fight is not financed by promoters with a big cash prize, does that mean that it is not possible to evaluate the fighter’s performance? Hardly.
Yet most companies are completely structured around this idea that money is the only motivation for selling a product or service — assuming that pay-for-performance plans are a necessary evil. Or worse, that this approach is the only path to success. Let’s stop underestimating each other and our friends who work in sales.
People work hard for the sake of being the best — because the outcome of that hard work has value in and of itself.
This is just one reason why we do not hire salespeople at Aha!, and certainly, no one receives commission-based compensation. Guess what? We are growing really fast and the team is incredibly happy — even the team that “sells” the benefits of Aha! to potential customers.
We have clear company goals and we hire high-performing people, and then we set them free to achieve. We also have a business model that puts the team and the customer first. And we share part of the company’s profits each year with everyone in the company.
Our success is proof positive that a no-sales and no-sales commission approach can work. And did I mention that customers love us? Lovability is something we have written extensively about and track as a metric.
It is time to let go of the old sales structure and look to the future. Buying has changed. Selling must too. Here are a few reasons why I believe it is time to eliminate sales commissions:
1. People are intrinsically motivated
We all want to do work that feels important. Salespeople are no different. The motivation to sell comes from the satisfaction of contributing to the company’s growth and the pride of helping a customer solve a real problem. It comes from knowing the sale made a difference.
Each of us has our own dreams and ambitions. It is only natural that we would want to do work that aligns with our strengths and goals. Making an impact within an organization and being recognized for it is a powerful motivator — more so than any check.
2. Selling is not miserable work
A sale is actually a value exchange — helping people fulfill a need and getting paid for doing so. It is a worthy pursuit that some people truly love. So to view it as unpleasant work that requires a commission to make it tolerable? Misguided.
This makes the unfair assumption that salespeople chose a profession that they do not even enjoy. Afterall, sales is a vocation — just like writing or teaching. Salespeople can love what they do just as much as any other profession. Yes, there are people who love to sell. It is obvious in the way they approach every day.
3. Exchanging value with customers is not a fight
Business is not a zero-sum game. Nor is it “war without bullets” as Nike CEO Phil Knight once said. In fact, in his memoir Shoe Dog he followed up that famous quote by noting that business is also the “path of coexistence, cooperation.”
Sure, we all want to grow faster than our competitors and be used by more customers. But we also need to build long-term relationships. This thinking eliminates the customer-versus-company mentality. And it is particularly important in today’s marketplace where most technology and software is rented rather than purchased.
4. Higher incentives do not always lead to higher performance
I am sure there are some business leaders who disagree with all of the above. That is fine — I can take it. But here is one thing that cannot be argued with: research. Studies show that pay-for-performance plans are not actually benefiting anyone.
According to the London School of Economics, performance-related pay “may reduce an employee’s natural inclination to complete a task and derive pleasure from doing so.” It is a lose-lose situation, creating a drop in both motivation and happiness.
For many of us, sales is about impact — helping people overcome a challenge and enjoy the process.
People need to be paid fairly, for sure. But it is insulting to think that folks will not work hard unless compensation is at risk. Compensation should be one of the rewards of the work, not the sole motivation.
So, in defense of salespeople everywhere, I do not buy this idea that money is the great motivator. It cannot be. I say salespeople want the same things as the rest of us — to do meaningful work and be appreciated for it.
What do you think are the pros and cons of sales commissions?