Building the Hockey Stick with Commissioned Sales

Sales is the heart of any organization. In the world of technology I live in, there is so much talk about entrepreneurial grit, market share, traction, freemium models, and usage. Yet none of that matters without sales. Without dollars in the bank, users and market share mean nothing. This is especially true of small enterprises where survival is contingent upon paying salaries, and nothing will help move your sales along than sharing a piece of the pie through commissions.

Dan Ostland (@dostlund) wrote this post about Fog Creek’s decision not to pay sales people a commission and wondered why commissions are “so widely lauded when they come laden with so many recurring problems.” He wrote:

There are all kinds of problems with commissions, for example, high turnover as salespeople shop jobs to get a slightly more lucrative commission system. Always attempting to maximize personal benefit which results in system gaming like making fake phone calls to hit call numbers, sandbagging deals into the next quarter, sniping new leads, and so on (the list here is actually endless).

The problems include infighting over who gets credit for accounts and sales. They include constantly comparing territories and account value to determine fairness between salespeople. They include an enormous amount of overhead as each salesperson sedulously tracks every transaction no matter how minute to make sure they get paid on it (by the way, they hate having to do this, and it’s a staggering waste of time. It’s also a place where weak salespeople like to hide out).

Those aren’t “sales people problems”, those are people problems.

Further, and at the risk of being forward, it probably signals management problems. I learned long ago that if you make complex, multi-tiered sales compensation plans, you’ll be rewarded with two byproducts: wasted staff time trying to calculate what is owed or earned, and the spawning of natural self-interests trying to figure out what and when to sell in a given month. Dan’s post indicates that his company has fallen trap to these very same issues.

As the business owner, I of course, had to start by selling. My motivation? Control my own destiny, doing what I loved (writing code), pride, and if all went to plan, a comfortable lifestyle. I’m sure Joel Spolsky started Fog Creek with similar goals in mind. But at the core of it all was sales. Without them, nothing followed.

So, I was a sales person first.

Today, I have a single dedicated sales person, and she’s freakin’ fantastic. She’s motivated by having control over her life (she has a young son), doing what she loves (working with people), pride of a great month’s sales and satisfied customers, and since all is going to plan, a compensation plan that’s easily calculable and awards her greatly for her hard effort.

In truth, she’s a great coworker first, and as a sales person she has all the attributes any sales manager wants in their team. Most of all, she’s effective. Her first month on board was our best month ever, and in doing so, she’s on her way to cranking in double her previous job’s earnings. She will be the first to tell you that she is motivated by the same things as any entrepreneur–including the compensation that comes with hard work and retaining very satisfied customers.

Fog Creek found solid footing years ago and doing away with commissions may work for them. There could be many reasons a company might not pay commissions: low margin products, very long sales cycles, declining product interest, or low touch, low value software services.

For us, we have a pretty young product with just enough history and engagement to qualify as traction. We’ve proven our software and now need to find the venues to use it. I cannot think of any better way to get the ball rolling than a sales person with a well-defined commission plan.

A good friend of mine, Cameron Gage (@camgage), is a sales manager who helped craft my own plan, and he’s been an inspiring leader and coach with lots of great insight into what motivates sales people. Cameron says that sales managers must go beyond money, and he suggests learning about your sales people by knowing what inspires them and understanding their long term goals. Is it security? A sense of belonging? Self-direction? Commissions can be the financial marker to a plan layered with other rewards matched to the person.

In my case, my sales person and I discussed her own goals, and I learned that flex-time, autonomy, pride, and the ability to effect her own income were all motivations. With our mutual goals and a “finish line” in place, we’re working backwards, and I’m going to do all I can to make sure she achieves her goals. And by god, if someone helps my sales graph start to bend upward, I’m going to reward her. It’s high time we see our ship sailing in, and our commissioned sales rep is at the helm of making it happen.