A couple years ago I eliminated sales commissions at RegOnline. It was a tough call at the time because most B-to-B businesses I knew had commissioned sales teams. I had some intense debates with my friends running those companies who thought I was crazy. I decided to make the switch for these reasons:
1. It was having a negative impact on the harmonious culture of the company (for reasons similar to what’s described in this Inc. Magazine article).
2. I didn’t believe we were getting a ROI from the incremental commission dollars we were paying out. Our search marketing strategies, website design, depth of product functionality, ease of getting started on their own, and simple pricing were collectively much larger drivers for sales than having commissioned salespeople.
3. We could have a selling advantage over our competitors commissioned sales forces. Our competitors were known for having very aggressive car-salesmen-like people annoying prospects. We became known as the no-pressure, friendly company to do business with (which goes a long way for most people).
4. Our salespeople could be motivated by having a score board in place of a commission check. How many connects a day? How many open accounts a day? How are you doing compared to your teammates? In fact, after doing some research I had found several studies (I’ll look for them and repost when I find them) where there was no difference in performance between a commissioned sales team and a non-commissioned team selling the same product (as long as there was a scoreboard of performance to motivate).
Overall I believe eliminating commissions was a great move because over the past 3 years we’ve attracted more business than we ever dreamed of and at a MUCH lower cost. I don’t believe commissioned sales forces produce the ROI that most people believe they do AND it creates a lot of side effects that aren’t healthy for companies. I believe what motivates better performance is not compensation, but better scoreboards by which we challenge ourselves off of every day.
Are you ready to get rid of your commissions in exchange for more revenue, lower costs, and better work environments?