Way back in October I decided to start a fire in my own kitchen – on purpose – by publishing the article It's Time to End Sales Commissions - Part 1. It was to be a three-part article.
As I expected the many of the sales community townsfolk took up torch and pitchfork to drive the monster away (SPOILER ALERT: me, I’m the monster) from their mid-month commission check.
The monster was undeterred from pushing forward.
However, the reaction was so strong, I felt I needed to split Part 2 into two articles. Obviously one was Time to End Sales Commissions - Part 2 (duh- I never said I was Charles Dickens) but the other was a treatise response to “there are only a few bad apple salespeople out there” argument I was getting from Parts 1 and 2 entitled “Sales Commission Plans - Sandbagging the Truth.”
I had planned to release the eagerly anticipated (by my mother, at least – hi mom!) PART 3 on the cusp of the new year.
Just this past week, I was so proud of myself having written Part 3. It is chock full of facts and figures and numbers and all types of wonderfully constructed arguments.
And I’m not publishing it – at least not for now. Perhaps not ever.
On Christmas Eve I got a phone call from Noah Goldman, host of the white-hot sales podcast (and not just because he interviewed me) The Enterprise Sales Podcast. If you’re not listening to his podcast, by the way, you should. And not because I said you should – because his last five/ten guests have probably sold a billion or so dollars’ worth of stuff and things to people who work in Enterprise companies. So if that’s your thing, you owe it to yourself to put your learning ears on and listen.
So, Noah and I had been texting about something that would make an excellent panel discussion on his show (Hint, Noah) - and as he needed to start out on a holiday drive, and as he didn’t want to end up in a ditch or the hoosegow, he gave me a call (YES, he picked up the phone!)
During our banter back and forth, he said something I’d obviously known for years, but the way he said it lingered with me long after the call.
He said “You can’t sell through logical persuasion; it has to be emotional.”
I thought about Part Three of my stupid article – did I have an emotional hook? One I hadn’t used in the previous articles? Was I relying on my powers of logic and reason to win the day and prove my point?
With my family screaming at me to “get off the phone it’s Christmas Eve!” I bid Noah adieu and proceeded to partake in holiday festivities, in the back of my mind worrying that my upcoming Magnum Opus was derivative, unpersuasive, and (worst of all) potentially boring.
I won’t say what happened next on Christmas Eve was a miracle – because I was there when my daughter was born and I know what one of those looks like – but I will say what happened next to me was serendipitous, sobering and thought provoking.
Enough to make me shelve my original Part 3 and publish this little chestnut.
You see, on Christmas Eve I heard this story, told to me by someone I’ve known for over 20 years, that I believe amazingly illustrates my point about, and my problem with, commission sales.
I believe it’s a better argument against commissions than all the CEB, HBR and LMNOP statics you can shake a Google-search at.
And certainly better than my original Part Three article was.
What I write now is a true story, told to me by someone I trust – and I offer it to you, not as evidence, but as a window into my mind, a person who has personally profited from commission sales and now believes we have to find a better way.
The names in this story have been changed or omitted - not to protect the innocent or the guilty – as those definitions really don’t apply to the people in this story who are simply doing their best to work within the system we’ve created for them.
They’ve been changed or omitted to make the point that this isn’t just their story – I believe it's all of ours as well....
Not so long time ago, in the beautiful and picturesque United States of America, there was a very old and very well respected company. This company was a market leader and averaged about $500 million a year in revenue.
While the company was responsible for providing a unique service to its customers and while the delivery of said service required some amazingly technical delivery teams, the favorite department of all the departments in the company was SALES.
SALES drove revenue. It was common knowledge that the executive class believed that without SALES, no one at the company had a job. So they invested heavily into their sales force.
And my oh my did they have an amazing sales force!
They hired the best people with the most industry experience. They provided them the best training, the best technology - the best of everything.
However, they were also hard on and very demanding of their favorite sons and daughters. They tasked them with incredibly aggressive quotas and when the quotas weren’t hit, the disciplinary effect could be staggering, swift and uncompromising.
But for those salespeople who performed, riches beyond the dreams of avarice were within their grasp. The company had created an equally aggressive and very lucrative commission compensation plan for their sales force. It was often joked in hallways and breakrooms that the difference between "almost hitting" quota and "hitting" quota was similar to the difference between taking a cruise and buying the boat.
At the end of 2015, the company set some very aggressive 2016 quotas for their sales teams. One team had a particularly aggressive quota. This was the team the person who told me this tale worked on.
As he told it, the team saw what was ahead of them. Craning their necks, looking up at the almost insurmountable quota-mountain in front of them, sales leadership and sales people joined hands and worked together.
And boy howdy, I mean they worked.
They cold-called, they social sold, the hunted, they farmed, they got referrals, they stole fishbowls full of business cards from steakhouses – anything they could to turn prospects into opportunities and opportunities into customers.
And however they did it – they actual DID it. You see, at the end of September 2016, for the first time in many years - this team – the one with the most aggressive quota – actually HIT their full year 2016 number with one quarter TO GO!
Huzzah! Huzzah! Cue the streamers and the ticker tape parade! Yes they did it! And every sales person’s coffers were full of silver and gold, bursting at the seams.
The company was overjoyed. The favorite sons and daughters had proven their worthiness. The delivery teams were working massive amount of hours, many of them overtime hours, delivering services and products to these new customers.
For a few weeks, everyone was happy – smiling faces were the uniform of the day - from the guy who swept the parking lot to the CEO. All as right with the world and it looked as if 2016 would be this team’s best year ever.
And then….nothing happened.
Literally, I mean NOTHING.
Sales stopped appearing on the board in October. Salespeople, many of whom had been working 60 or 80 hours a week previously, stopped answering phones. Sales managers clicked “updated Inbox” like Morse-code operators in old movies – but with no new orders coming in, their inboxes stayed empty.
The teller of this tale told me that, at first, management chalked it up to human nature. Executives thought “Coming down off three amazing quarters, these salespeople will soon start selling again…that’s what they do after all.”
When October came and left and sales didn’t pick up, people started worrying. Not just regular middle management people, but the important people. People in corner offices with neck ties and assigned parking places next to the handicapped ones in the parking lot.
So when November arrived management tried to cajole these sales people into selling, creating contests with other teams, special SPIFS, and they even amended the 2016 comp plan to add another bonus to Q4.
And still, the sales did not come.
Midway through November, it was time to stop f*cking around – at least that’s what the C-levels thought. They started getting serious. They tried to threaten sales people – to tell them their jobs were on the line. To tell them to get off their a**es and sell some stuff and things!
And the salespeople laughed and laughed. For these weren’t B or C salespeople, for whom these threats normally worked. These weren’t underperformers who relied on their draw to pay bills – they were Ricky Romas, they were Top of the Board!
They were seasoned sales pros who hit their yearly number in SEPTEMBER, after all.
“Go ahead and fire me” they said. “That’ll release me from my non-compete and I’ll go across the street. I’ve had my best year ever and its only November!”
The salespeople knew the threats were empty…and they continued not to sell.
December blew in as sales starved as November was, and executive management, heads hung heavy under the weight of responsibility, made some grave announcements – as sales were extremely light so far in Q4, there would have to be layoffs.
Not in SALES, my storyteller exclaimed. They were all home – secure in the knowledge that the threats of firings and job loss from management were as empty as a bird’s nest in December.
And who could blame them, really? For years they had been told they were the company's “favorite sons and daughters.” For they were the creators of revenue. They were the “reason” everyone had a job at this company.
No, the layoffs were in Service, in Delivery, in Billing, in Admin. In the parts of the company not directly responsible for revenue – but still responsible for making sure services were provided, products were delivered, invoices were paid…making sure the trains ran on time.
For many of these people and their families, it was not a very Merry Christmas.
So what had happened, I asked? How did this story unfold? Please tell me the reason this team, this quota busting team, didn’t perform in Q4?
As the teller took a drink, he smiled a knowing smile and said that the reason this happened is as old as antiquity.
For like Alexander the Great, after fighting and battling and scaling every peak, this sales team saw the breadth of their domain (their first three quarters) and realized there were simply no more worlds to conquer.
Unlike Alexander, he chuckled, they did not weep. They just stopped selling.
Now they didn’t stop working – these weren’t scrubs after all – they simply stopped selling.
Why would they do that, I asked?
The tale teller answered - It was deceptively simple: They had reached the limit. Sure they could sell more, and make a little more commission – but to what end? Was all that trouble really worth a few more diamonds on their already diamond encrusted shoes?
No, these sales people had been around this block before. It was a far, far better thing to sit back and fill Q1 2017. None of them knew how aggressive and unreachable the quota would be like next year – but they were smart, professional sales people and they could guess.
So rather than wasting time selling more in 2016, for minimal upside, they simply worked on front loading 2017.
Mind you, there was no grand conspiracy, these sales people did not meet in darkened alleyways or under streetlamps in the dead of a foggy night to hatch this nefarious plan.
This was simply the way they thought – individually – as they were experienced and professional, quota bearing salespeople who worked their entire sales careers for companies with a commissioned based compensation plan.
And as the teller of this tale finished up this story, he let me know the sales team’s Q1 is looking wonderful, so there are meetings happening this week in Executive Row, where men in top hats who cluck their tongues and stroke their beards will most likely talk about how "We need larger quotas and a higher cap on commissions to ensure this doesn’t happen again!”
And most of the people laid off will most likely be hired back…eventually…as business picks up.
And all will most likely be forgotten, if not forgiven, as this very old and very respected company continues in 2017 on its singular mission (as stated on its marketing material) to provide the “best customer service” in the industry.
The moral of this story? Well, that’s up to you.
There are no good guys or bad guys in this story. I don’t blame management for setting quotas and I certainly don’t blame salespeople for hitting them.
I don’t even blame the salespeople for fluffing off a quarter – let he or she who is without “checking out” for a week after a huge month cast the first stone, ok?
And honest to goodness, I myself have had great quota busting years, only to have my quota increased exponentially to a level of almost inhuman and inhumane proportions. So I don’t blame them for spending Q4 prospecting for Q1.
The point of this story isn’t to blame, to cast aspersions. I adore salespeople – I’m one myself – and it’s one of the most misunderstood, most challenging and most satisfying careers out there.
This story (and it IS a true story, I promise you) is intended to simply illustrate these points:
- Sales Commission Plans create an environment where the needs of the salesperson will always outweigh the needs of the company or the customer. This isn’t about good apples or bad apples – it’s about the basket we’re all in.
- There has never been, nor will there ever be, a commissioned based comp plan that’s ungamable by sales reps. If you’ve created one, publish it in a book and make some jillion dollars. I have my credit card ready when you do.
- Higher quotas, higher or no commission caps, bigger payoffs & better contests aren’t the answer. Because they can always be higher, bigger, better….more
- While it feeds our ego as salespeople (mine especially) to believe we are the engines of revenue and thus the most important entity in a company, we need to realize and accept that those people who fulfill, deliver, management and execute what we sell are important to our renewals, our referrals and our brand identity – all of which are incredibly more important in this interconnected world we find ourselves in – where a single tweet about bad service or a bad customer experience can end careers and companies.
This isn’t just theory for me – I’m not trying to sell you on this without eating my own dogfood.
At ZynBit we’re working on compensating sales, service and support on revenue. Period.
No individual sales commissions. Everyone gets paid on everything. How we do that is our secret sauce, but it’s that simple in theory.
So what about Charlie who doesn’t do half as much what Deborah does, you ask?
Is it fair that both are paid the same?
No it’s not.
So we also work on hiring people who share our values and want to work with likeminded and highly self-motivated people. If you’re someone who needs motivation or someone who worries about what’s in the other person’s paycheck more than your own, or if you feel it’s ok to do less than someone else and get paid the same, then this isn’t the place for you.
If you’re Charlie and work here, you’ll still be Charlie, but somewhere else and in very short order.
All of us here in Leadership have worked too many years in too many orgs with too many people that need to be cajoled and pampered and threatened to do their jobs. We’re not interested in that here at ZynBit. So we’d rather have less people – but better people – that can do more.
Do more with less. Sounds like a B2B value prop. We LIVE it here.
So will getting rid of commissions work for you and your org? I don’t know.
Is it a conversation you need to have? Yes, I think it is.
Will you? That’s up to you.
I hope you all have had an amazing year this year and I look forward to sharing and arguing about sales commissions and prospecting and social selling and about sales and sales culture with you in 2017.
And as always, if you’re interested in ZynBit and what we do – read our customer reviews and try it for yourself.
The proof of any sale pitch – as you know – is always in the pudding.
See you next year!