I'm in the middle of writing a series about The End of Sales Commissions and I'm getting a lot of feedback, in both public comment and private email - so thank you so very much for that. Whether you agree or disagree (no one, it seems is "indifferent" when it comes to sales commissions) all opinions are welcome - we don't learn by just listening to ourselves.
So Part 2 is coming soon - but I wanted to address a reoccurring opinion I'm getting. It's been communicated to me in both public or private message and here it is:
Yes, Derek, there are some people in sales who are extremely greedy and only care about short-term gain. Any good salesperson cares about customer retention and will do the "right thing" - the commissions don't have anything to do with it. There are just some bad apples in sales and they make it bad for the rest of us.
This really does sound so good to me - that it's only the "bad apples" that make the rest of us look bad. I know some amazing salespeople - people that are so kind and so very generous. I know salespeople that use vacation time to volunteer and dig water wells in sub-Saharan Africa. I know salespeople that build homes for Habitats for Humanity on their weekend. I know salespeople that foster abused aminals and are Big Brothers/Big Sisters to at-risk youth. I know people who donate large portions of their salary to charity. These people are the salt of the earth and are definitely not "bad apples."
But every single one of them I listed above was known by their colleagues as a serial sandbagger.
Yep, I'm talking about it.
For those not in sales, sandbagging is the art of holding off on "closing a sale" and waiting for the next month or quarter because:
- You've already made your quota and your max commission or bonus and this deal would add nothing to that - and its better for you, financially, to count for your next month's/quarter's quota
- You are hopelessly behind this month/quarter in quota, and this sale won't help you at all. It's better for your numbers (and your job security) to hold off and start fresh with a quick sale next month.
- A contest has been announced rewarding max sales/gross profit/revenue - whatever - next month and you'd like to win it.
Sandbagging is a lot like the weather - everybody complains about it but everybody does it nobody does anything about it. But sandbagging - and it's proliferation - causes more harm to a company that we like to think or talk about.
It denies your employer revenue that's rightly theirs. It opens the door to a competitor stealing a deal. It screws up forecasts and pipeline reports. It makes what's in your CRM basically garbage. It robs the customer from the ROI they'd get from using your widget NOW.
So why do people sandbag? Because we don't give them a choice. We've created comp plans that pay them better if they move deals around in ways that benefit THEM and not the company or the customer.
Way back during the 70s, a professor guy named Steven Kerr wrote the article "On the Folly of Rewarding A while Hoping for B" in the Academy of Management Journal. The main crux?
People will do - or pretend to do - the things that are rewarded rather than the things we say they should do.
Isn't this what a commission comp plan is? We as sales leaders talk and talk and talk about customer retention, relationships and teamwork and customer satisfaction and innovation and risk taking - I mean that's ALL over LinkedIn. Every article even tangentially about salespeople is about "doing the right thing!"
Yet - we don't pay for any of those "right" things. We don't pay salespeople to innovate, or take risks or for customer satisfaction - we HOPE for those things.
Like Homer (Simpson) said - When you have nothing left to believe in, believe in hope.
What we pay salespeople for sales. That's it. We have created a commissioned comp plan culture that incentivizes salesperson self interest over company goals or what's good for the customer.
We reward A (sales) and hope for B (that the salesperson always does the right thing)
And then we act like Claude Raines in Casablanca when we find out people are gaming our system.
I understand the "bad apple" apple argument. It's what we want to believe. We want to believe only horrible, criminal-like people would be dishonest and cheat the company, cheat the customer - all because all they care about is their own compensation.
You know who had a lot of "bad apples?" The former CEO of Wells Fargo said they did. About 5300 of them, supposedly.
As the WSJ reported, when Wells Fargo wanted to "deepen connections to customers", they had the idea the best way to do that was by increasing the average number of products or services each of their customers used from 3 to 8. So they created an aggressive comp plan with quotas and bonuses and promotions. I would bet my next paycheck (base+commission) not a single person who designed that comp plan wanted employees to create 2 million bogus bank and credit card accounts.
The point of my series of posts on The End of Sales Commissions is not to destroy capitalism and replace it with some loopy hippy State of Free Yogurt for Everyone.
And it's not to say every company that pays commissions out there is Wells Fargo - far from it.
I'm writing to simply examine ways we can do this:
Reward B (the salesperson doing the right thing) and by doing that automatically get A (sales.)
I hope you're interested in examining that as well. I know Wells Fargo is - because they are scrapping their old comp plan.
Which begs the question - if it really WAS bad apples....why change the comp plan?
Let me know what you think. And thanks for reading.