Monday, February 6, 2012

Why do we pay sales commissions?

Dan Ostund exposes his ideas around the elimination of commissions for salespeople.

No matter who explores this subject, the conclusion is always along the same lines:  they are detrimental and counter productive.

5 comments:

  1. Excelente artículo. De acuerdo al análisis del artículo y a uno de los principios fundamentales de TOC de que "La gente es buena" la Teoría X de MacGregor no es válida.

    De hecho solo me falta invalidar o solucionar un supuesto para estar completamente de acuerdo y es la alta variabilidad e incertidumbre dentro del proceso de ventas, como una causa para utilizar comisiones de venta.

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  2. Hi Pablo, sorry for the delay responding.

    If I understand correctly, what you are saying is that in order to manage uncertainty in the sales process it is necessary to use sales commissions, but I think I'm missing the because to know what assumption you are trying to question?

    By the way, have you read about Theory Z? I think you will find it very interesting and inline with the "people are good" principle of ToC. Take a look here: http://en.wikipedia.org/wiki/Theory_Z

    Thanks for commenting!

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  3. Santiago,

    Actually my comment is about discussions I have had with some customers claiming that because of the high uncertainty in the sales process and its outputs, they prefer to reduce the risk by keeping salespeople as autonomous agents. And that would be another cause to use commissions.

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  4. Interesting, and I assume that you tried to persuade with cause and effect (or speculated cause) if their assumptions are valid?

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  5. Of course, I tried to show that there is a way to reduce the variability in the sales process and increase predictability in outputs and hence less risk and no need for autonomous agents. This is the hardest thing to do. On the other hand some clients raised concerns about the psychology of the salesperson who is very well explained and invalidated in the article.

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