I imagine they had to introduce variable comp for sales because they weren’t able to hire even a single good enterprise sales rep for a flat $200k. It’s not a culture thing, it’s just the market rate for the role. If they paid a flat $500k they’d stand a better chance of avoiding variable comp.
I find the whole variable comp for sales so bizarre. It’s like people trying to claim that the only way to get decent work out of programmers is by giving them comp on lines of code written.
Why can’t a salesperson be properly motivated by just, you know, doing their job?
I understand where you are coming from but it doesn't work like that. Sales people are have direct measurement where the rest of us have proxy measurement. They also typically hold pre-existing relationships with potential clients. They take on more risk than any other side of the business except for executives (who are often former sales people).
But if a sales person performs wildly above what is expected of them it can change EVERYTHING for a company. Engineers are actually similar in potential impact, but measurement is a challenge... which is why we are typically paid higher than other cost centers in a business but why we are not on variable comp.
The thing that's unusual about sales is that it's the only metric that anyone's ever found that's (mostly) an exception to Goodhart's Law. Companies would love to pay a lot more people on commission if you could find a way to calculate commissions that gave the desired incentives.
It's not really that it's an exception to Goodharts Law, it's that Goodhart's Law only applies to measured proxies. If the goal of a company is first and foremost to make money, then sales is the only organization within the company that can be measured exactly according to the primary goal of the company rather than a proxy.
Goodhart's Law still applies to the extent that companies have other goals and sales's incentives totally screw those goals up. But they are very effective incentives at increasing money earned.
> If the goal of a company is first and foremost to make money, then sales is the only organization within the company that can be measured exactly according to the primary goal of the company rather than a proxy.
This feels culturally accurate but also reductive. The best sales teams cannot sustainably sell a product that fails to have product-market fit. Likewise, the best product requiring a sales-led GTM will fail if sales teams are not able to understand and articulate the value.
A compensation imbalance between customer-facing and non-facing roles builds an imbalance of power dynamics within a company that will ultimately destabilize the culture and success of a company.
Really good sales people know the literal dollar value of their work. They often times have large networks, existing relationships, and know how to use them to make money. Every really good sales person I’ve ever known gives literally no shits about what anyone tells them because they’re closing. They know it’s their relationships more than anything pulling in the cash. When you’re closing deals for millions upon millions of dollars, if you aren’t getting paid enough there’s a competitor out there willing to do so to buy your relationships.
If engineers knew the literal dollar value they provided they, and could prove it, we’d likely be more motivated by money as well.
Addendum/Edit: I still think the best job ever is selling commercial aircraft. Close a deal on a fleet of 747s? You’d probably make a lot of CEOs blush with that pay day.
Below, we see lots of interesting replies, but none mention the fact that nearly all sales jobs have variable comp. Thus, if you do not offer variable comp, the best sales will never work for you. A good way to think about variable comp: It allows you to attract and retain superstars. In some sense, big tech already does this with their top 5-10% of technical staff by paying regular, large cash/share bonuses.
It's a few things.
1. Sales people see the exact dollar amount they are making for the company. This is different than almost any other role. Most people can't quantify how much value they generate. A lot of people here are arguing that the reason is that there is a direct quantification, but that's not it. The reason is that there is a direct quantification AND they know exactly what it is.
2. These are people that convince others of things for a living. The skills that allow them to be good at their job also allow them to negotiate for extremely favorable compensation mechanisms.
3. At this point, it's how their industry works. If you try something else, you won't be able to hire sales people. They are very competitive, and not idealistic like engineers. You're not going to convince them to take a flat comp structure that is the same as every other employee's.
They are. And they have one job. To sell. So they’re motivated by the only output that matters in their job, how much they sold.
A lot of selling is zero sum. For you to win, if usually means someone (a competitor) has to lose. So it attracts competitive people just like programming tends to attract more analytical people.
There's an underappreciated corollary to sales comp.
1. If they're variable comp.
2. And corp controls equations.
3. Then corp can drive sales outcome it wants by changing equations.
For how messy ground-level sales at scale is (read: relationships, promises, conversations), this nicely simplifies and aligns what leadership wants to happen in sales with what actually happens.
Simply by tying sales comp to whatever the specific sales plays leadership wants more or less of.
Smart sales people are excellent at self-aligning their behavior to compensation incentives.
It's just an industry standard. They are merchants, they could just buy the servers and resell them, so they negotiate a comission/a lower than listing price.
If you actually considet all of the merchants, what's actually uncommon is to be anything other than 100% commission/margin based.
