I read a very insightful article today by Daniel Pink that discusses the effectiveness of sales commission on salespeople performance, and whether they really increase the motivation to sell more. I thought about it, and concluded that even though it might create a motivation to sell more, it doesn’t necessary lead to an increase in sales. I base my conclusion on my past experience as a salesman in a Startup company named Mondex in Israel back in 1998.
The position was very simple, offer the service to people to use, and sign as many people as you can. The company believed in its innovative service, and had a “no commission” policy to its sales-force. We all earned the same salary, and we all helped each other closing sales. It was weird at first, but we believed in our goal, and believed in our product.
The policy of “no commission” changed about 8 months into the existence of the company, which led to the following consequences:
- we were all fighting for customers
- we stopped helping each other
- we were so concerned about getting a salary that we even started lying about what the product actually did.
- sales dropped
Anyone who worked in sales received a lower salary, which demotivated everyone in the group, and led to a massive lay offs by the company.
The company closed its business by the end of that year.
Back to the article, A sales commission might create more motivation to sell, true, but the question that one should ask him/herself is at what cost? Is it at the cost of lying to the customers just so you can make a sale? Is it at the cost of creating a rivalry among employees? Is it at the cost of demotivating some of your sale-force? The answers are yes, yes, yes and yes…respectively :)