Why Must You Pay Sales People Commissions? (a16z.com)

An anonymous reader shares an article: Sales is highly competitive work. That word -- "competitive" -- is the key to a high-performing sales organization. In order to be great at sales, you must outsell the competition. The competition might be a product from another company; it might be an internal project at the target company; or it might be the undying desire of the target customer to do absolutely nothing, which is often the toughest competitor of them all. At the end of the day, it's all a fight. And how do you get the most fight out of an organization? By offering a prize. As the old boxing saying goes, "This is prize fighting. No prize, no fight." Prizes and competition are critical to building a healthy sales culture. So what's an unhealthy sales culture? One that's governed by politics. Sales people must sell into highly political environments to succeed and that's why they don't want to live in one. If you do not evaluate and pay on what sales people sell, then what do you evaluate and pay on? Getting along with others? Kissing the boss' butt? Talking a big game but delivering nothing? Sounds like politics and sales people instinctively know it. When a CEO says, "we're going to evaluate you on things consistent with the culture" the sales person hears: "we are going to toss out objective financial metrics for the subjective will of the king." Great entrepreneurs are great innovators, and innovators love to innovate. But before you innovate on sales compensation, make sure you understand the strengths of the old system.

Comments

a16z looks like a junk site

[xxxJonBoyxxx]

The source of the paid article is a16z.com, which sounds like a phishing site but it's actually some crappy VC's blog.

Re:Because they see the money

[whoever57]

But when you pay someone to be a salesperson they know EXACTLY how much income they generate.

That's true, but not the complete picture.

In general (VC funded startups excepted), what is important to a company is profit, not revenue. A sale person who increases revenue simply by agreeing to lower prices and hence at reduced profit is not so valuable to the company.

This is a very important concern in software companies, where the cost of manufacturing is zero, yet, customers must pay enough to support future product development.