Startup Sales Compensation: When Commissions No Longer Make Sense

This is a great read — especially for entrepreneurs who are new to running a sales team. 

It must be written in some important document somewhere that “thou shall compensate your sales people with a percentage of the final sales price or deal size” — the reason I say this is that everyone thinks they need to implement it.

While you would think commissions align the salesperson and the company, I have seen it time and time again do the opposite.  The smart salesperson’s primary focus is about putting money in his/her pocket, and will manage their pipeline, opportunity flow, and deal sizes accordingly — regardless of how it affects the overall business. The less than stellar salesperson will use their commission performance as evidence that the product/service they are selling sucks or marketing is not doing its job. And the average sales person will constantly feel underpaid and concerned they are getting screwed over somehow by management. In the end, all three types create management and administrative distractions that can be debilitating without strong management.

My feeling: drop commissions altogether in favor of a base + bonus plan.  While you may lose interest from the hotshot salesguy/gal, you will create an atmosphere where the best interests of the company as a whole are put ahead of individual gain.  To me, that is the best trade off.