“It’s difficult to get a man to understand something, when his salary depends on his not understanding it.” - Sinclair Lewis
"Why on earth did you sell them Widget 2.0? It's old, it's buggy, it's been discontinued and we stop supporting it at the end of the year! We told everyone in Sales to sell Widget 3.0!" - Fulfillment/Delivery/Customer Success Manager
"Um, Sorry - I make more money in commission on Widget 2.0" - Every Salesperson Ever
So over a year ago, I poked the sales leadership bear asking if sales managers added any value anymore. Later I talked about how managing sales activities actually kills your pipeline and followed that up with why you can't expect to sell what you can't give away. Just in the past month I declared the telephone dead for salespeople.
So what naked emperors are left to point out? Well...
Today I come not to honor sales commission plans - but to bury them.
It's really time to talk about the huge elephant in the room - the fact that sales commission plans are archaic, antiquated and are actually harmful to the process of our customers buying our widgets. And this isn't just something that came new with the internet or LinkedIn or social selling. This is has been the case for awhile.
I like telling stories - so here's a story:
Scene Begins - Internal Office
Imagine you're in a sales training room. It's beige walls and community college desk/seats are gleaming in the morning sun. The cut rate coffee is brewing and there's banter between the sales people - war stories are exchanged, gum is chewed to cover the smell of last night's gin & tonics with the Anderson Account, professional jealousies are disguised as good-natured ribbing about stack rankings and commission checks.
It's 7:30am and the head of Development/Manufacturing is at the podium. They ask everyone to settle down - about seven times - until the VP of Sales says "Let's get this thing started so we can get back to making money!"
The sales "team" (in name only) buzzes, shuffles and finally sits down. They all look to the front of the room, where the PowerPoint screen blazes in magnificent Pantone colors their newest product offering. The person at the podium talks about, in great detail, how long it took them to develop, how many tests it had to go through, how much better this thing is that the other things, how awesome it is, how it's going to change the way the company is thought of in the industry. It's ground-breaking, it's...
"Excuse Me" says one of the sales people. The presentation stops.
"Yes? What's your question?" the speaker asks...knowingly.
"What's my cut on this thing...whatever it is?" And now, for the very first time in the meeting, every set of eyes is on the speaker - they have the complete and utter attention of every salesperson in the room.
"Well," the speaker says, looking down at their notes "...it's a new product and we have to recover our development costs so the commission percentage islower than..."
There's a murmur among those seated. It turns into a gaggle. The spell has been broken. Some appear to be listening, but it's just for show. Every single salesperson is back to thinking about their quotas and how they're going to eat this month.
The speaker has lost them, their attention is elsewhere....they will hear no more about this new offering that pays them less than the old one.
And that's why we don't have Flying Cars.
Ok, Maybe that isn't the way it really happened. And please don't take this as me "blaming" salespeople for the fact we all don't fly around like the Jetsons. I don't quite agree with Steve Jobs - IMHO salespeople don't kill innovation. But I do believe that the way we structure sales compensation plans can have a deleterious effect on what is sold to customers and why it's sold.
I've been a commissioned salesperson for YEARS. And I have been in these meetings hundreds of times. We all have. Probably even this week.
Here's a truth bomb for you - I have personally asked that type of question in these meetings: What's in it for me?
If you're in Sales that should be about as shocking as ketchup on French Fries.
Here's what I think is the dirty secret about commission sales compensation plans that we all either know or suspect but never ever talk about:
Sales commission plans create conflict by design - they pit what's best/right for the CUSTOMER against what's best/right for the COMPANY against what's best/right for the SALES REP.
In other words, "salespeople sell what, and only what, makes them money."
And with that, I'll end Part 1 there.
In Part 2 we'll talk about how I've come to believe this inherent conflict created by commission based comp plans has spawned a toxic sales culture that has driven customers away from sales people and into the arms of technology. Everything we're seeing - the new buying process, the rise of e-commerce in B2B, the RFP process, the death of the relationship sale...all a direct outcome of simply creating an environment where we pay someone more if they sell more.
I'm interested in your take - let me know what you think. Talk to you soon.
UPDATE: Oh and if you can't wait for Part 2, here's my answer to the number of comments I've received that say "There's always 'bad apples' in sales - commissions don't have anything to do with it. Most salespeople do the right thing."