Are you considering eliminating all sales commissions in favor of standard (salary + bonus) compensation for your reps? If so, we’re 95% confident that you’re suffering from one of the following symptoms:

  • Managing your sales commissions is taking too much of your time
  • Your commissions aren’t promoting expected sales behaviors
  • Commission spend is taking an excessive toll on your business

Did we get it right?

The Case Against Sales Commissions

In this interesting article (“Why Sales Commissions Don’t Work – In The Long Run“), the author recommends eliminating sales commissions based on the following 6 arguments:

  • Sales commissions don’t motivate from within
    • Sales education is more important than sales motivation
  • Sales commissions sub-optimize rather than than optimize
    • Sales commissions are too focused on short-sighted numbers
  • Sales commissions point fingers at people, not systems
    • Sales commissions measure people, but measuring systems is more important
  • Sales commissions aren’t future-focused
    • Sales commissions are too focused on short-term results (vs. overall direction)
  • Sales commissions aren’t based on learning
    • Sales reps require a fundamental understanding of goals & strategy
  • Sales commissions aren’t best for the customer
    • Sales commission mechanics obstruct adjustments benefiting customers

The author successfully eliminated sales commissions, with a positive outcome for his organization:

As a result of eliminating commissions, we now see sales team members taking pride in their work and finding more joy in it. People no longer feel like they’re part of a cat-and-mouse game, in which they’re on the opposite side of the table from management. 

While we agree that eliminating sales commissions makes sense in some environments, we disagree that this makes sense in general.

First, let us state that there is no doubt that faulty sales commission programs wreak havoc on sales organizations. In fact, faulty incentive programs typically do a lot more damage than just “sub-optimize” or fail to “motivate from within“. Faulty sales commission programs:

  • Fuel disputes between reps, management, and finance
  • Cause reps to waste considerable time calculating their own commissions
  • Create a feeling that the organization isn’t being transparent
  • Generate significant manual work for finance teams
  • Cause top reps to leave over commissions

Eliminating sales commissions is a sure way to make all those issues magically disappear. However, is abandoning sales commissions the right remedy, and what will be lost along the way?

To identify the appropriate remedy, we must first understand the problem. Very likely, the problem isn’t sales commissions per-se – it’s a faulty incentive program. Eliminating sales commissions means taking the easy way out. Crafting a well-designed incentive program is difficult, but it also is what it takes to run an A+ sales department!

The Case For Sales Commissions

In our opinion, in most environments, eliminating sales commissions doesn’t make sense. There is clear social proof that superior sales organizations thrive on well-targeted, powerful incentives. In addition, eliminating sales commissions can be hard to digest for many reps.

After you eliminate sales commissions, you will likely end up with a cohesive group of average performers (and a somehow happy sales culture). However, your top performers will be long gone. They will realize that they are part of a system where compensation is capped, and where their sales aptitude isn’t as valued as before.

By eliminating commissions, you’re also saying goodbye to some essential sales accountability. Unfortunately, with most sales processes, it’s quite easy to drop the ball. For example, a lack of timely follow ups with customers can easily cause sales to disintegrate. As the author in favor of eliminating sales commissions states, “I don’t believe in measuring people – period“. We strongly disagree with the premise that you should only measure systems and not people. Sales are driven by systems but also by people, and how they behave has a direct impact on the bottom line.

By eliminating sales commissions, you’re also giving up on valuable opportunities to motivate your reps. You’re saying that it’s never useful to personalize rewards. You’re making a statement that reps don’t deserve a stake in every sale. In our opinion, this contrasts with how most sales representatives’ brains are wired. Fulfilling high-level corporate objectives isn’t what most reps are after. They’re in it for the hunt, and for the kill.

Commenting on the author’s arguments against sales commissions:

  • Sales commissions don’t motivate from within
    • What’s more motivating than earning a commission for every sale? It doesn’t prevent you from educating your sales force about your vision. Money talks.
  • Sales commissions sub-optimize rather than than optimize
    • This only happens if your incentive program is rigid and isn’t refreshed based on new facts. Creating multiple incentive plans is also a great way to optimize across key dimensions.
  • Sales commissions point fingers at people, not systems
    • Sales are driven by systems and by people. Don’t give up on measuring and rewarding individual sales accountability by eliminating commissions!
  • Sales commissions aren’t future-focused
    • Great incentive programs include monthly, quarterly, and yearly components. They’re also based on challenging, yet realistic sales projections.
  • Sales commissions aren’t based on learning
    • Well-designed sales incentive programs promote specific sales behaviors (ex: promote a new product). This in turns motivates reps to keep learning new facts required to sustain those behaviors.
  • Sales commissions aren’t best for the customer
    • Sales commissions promote what’s best for the organization – not what’s best for customers. However, nothing prevents you from including incentives based on, say, customer satisfaction.

In Conclusion

Most organizations who choose to eliminate sales commissions do so because of a faulty incentive program. Managing sales commissions is too significant a burden, or has poisoned the well. Eliminating sales commissions is easier than trying to fix the problem.

However, eliminating sales commissions also means giving up on powerful incentives – those superior sales organizations demand and thrive on. Don’t give up on your sales commission program! Visit us online to learn how you can automate your sales incentive program, motivate your sales force, and increase transparency.