Socialism in the Sales Department?

When people hear about the principles that underlie the Teamwork Selling approach—especially the idea of eliminating individual sales commissions—one reaction that crops up fairly regularly is: That sounds like socialism. It’s a reaction so common that it’s probably worth exploring a bit.

SocialismThis objection is based on the notion that salespeople are motivated primarily by the prospect of earning large amounts of money through individual sales commissions. Greater individual efforts lead directly to larger sales commissions, so the story goes. The company benefits because each salesperson wants to make more money and they can only do that by selling more. If companies didn’t pay sales commissions, defenders of traditional compensation ask, then how could they motivate salespeople to sell? The entire sales organization, they tell us, would devolve into mediocrity.

It’s an argument that’s rooted deeply in traditional sales culture. It’s also one that’s facile… and wrong.

For one thing, the arguments in favor of paying individual sales commissions closely mirror the arguments that were made three quarters of a century ago about piecework payment for factory workers. In each case, the basic message to workers was the same: If you work harder, you can earn more money. Also in each case, management believes that it’s saving money by not having to pay for poor performers.

The theories of W. Edwards Deming (and the research that informs them) made it clear that piecework provided false economy and undermined a company’s overall manufacturing performance. In the case of factory work, it is now widely understood that—just as Deming contended—workers respond more positively to  things like improving trust in the work environment, reducing fear, and breaking monotony all contribute to improvements in morale and productivity.

And, as a few cutting-edge companies are beginning to demonstrate, the same basic dynamic applies in the sales department. Salespeople, like other employees, respond to a wide variety of workplace factors. Overall compensation is only one of those factors… and it’s not even the most significant one. If managers really want to motivate salespeople then there are much more effective ways to do it than perpetually dangling carrots in front of them.

But here’s the real giveaway in this debate (what gamblers call the “tell”). If we believe that some sort of individual performance incentive is the best way to motivate employees then why don’t we pay other employees that way? Why don’t we pay service technicians based on how many calls they handle? Why don’t we pay cashiers based on how many customers they process? Why isn’t everyone paid based on individual performance?

As it turns out, there are two basic reasons. First, we’ve learned that focusing solely on throughput numbers inevitably results in a decline in the quality of output. Work gets careless—even sloppy— in a singleminded pursuit of inflated output. When it comes to business-to-business interaction, there are very few situations in which quantity is ultimately more important than quality. (In the world of sales, we see this play out all the time in the wake of a sales contest or some other kind of sales incentive program. Deals unravel as a result of opportunities being crammed through the pipeline without regard to suitability or quality.)

The second lesson we’ve learned about this type of compensation is that it reduces the cohesiveness of the organization. Managers are more effective when their employees are more oriented towards the company’s success than towards their own immediate remuneration. Employees are more focused and more effective when they’re not weighing every assignment according to whether or not it enhances their own income. (I’m confident that anyone who’s ever managed a sales organization will confirm the fact that commission disputes are the great bane of their professional existence.)

So, should we believe that there is something different about people in the sales department that makes them different from people in every other department? Or should we go with the simpler, more likely conclusion that it’s time to rethink the way we run our sales organizations? The latter choice isn’t socialism. It’s realism. Or at least it is for those sales executives who are willing to look beyond the traditions of the past towards the opportunities of the future.

“Adopt the new philosophy…”

. . . competition, we see now, is destructive. It would be better if everyone would work together as a system, with the aim for everybody to win.

W._Edwards_DemingIn his book, The New Economics for Industry, Government, Education, W. Edwards Deming debunks all sorts of ideas that were widely accepted in American business at the time, the above-quoted skewering of a work environment based on incessant competition being just one example.

Deming’s vision of how business processes worked departed radically from conventional wisdom of the day and was generally ignored here in America. It was only after Deming’s ideas were adopted as the foundation of modern Japanese manufacturing following World War II that U.S. business leaders began paying attention. Today, it’s clear that his thinking (including his famed Fourteen Key Principles) has profoundly transformed the entire sector of modern manufacturing all over the world.

But Deming’s work has implications far beyond the world of manufacturing. In fact, all of Teamwork Selling is based on Deming’s ideas about how to make processes work more effectively. Deming encouraged managers to look at a process as a whole rather than just assuming it would be the sum of its discreet parts. Through Deming, we’ve learned to look at manufacturing as a process but we never really tried to apply the lessons that Deming taught to the process of selling.

Dr. Deming’s efforts to change manufacturing got no traction in the U.S. until the 1970s when the superiority of his approach—as evidenced by the way that Japanese manufacturers were beating us badly in market after market—became undeniable. Traditionalists in the world of manufacturing had to be dragged, kicking and screaming, into a new and better model of how to make their factories work.

There’s no question about the fact that traditionalists in the world of business-to-business sales management will resist a better model just as adamantly and basically for the same reasons. They sincerely believe that a sales culture based on (1) individual sales commissions and (2) assigned accounts and/or territories will provide a beneficial Darwinian incentive for increased sales and better customer care.

It’s a persuasive theory based on a century’s worth of tradition and heaping helpings of commons sense. Unfortunately, as Will Rogers once said, “It isn’t what we don’t know that gives us trouble, it’s what we know that ain’t so.” Perhaps the traditional approach to sales management was the best available one back in the days of Willy Loman. Even if it were true then, there’s a growing body of evidence that it’s no longer true today. In 2015, it’s time to apply Deming’s principles to the process of selling.

In today’s technological environment, we have the tools to create a new model for the process of selling, one that reflects the principles that W. Edwards Deming developed for the process of manufacturing. In a world of ubiquitous connection, instantaneous response, and social activity, old-style sales organizations are increasingly unable to engage effectively with prospects and customers.

The Teamwork Selling response to all of this is that the answer might call for an  interpretation of Darwin that’s considerably different from popular conceptions. Perhaps Darwinian principles really do work in business… but we just don’t understand Darwin properly. There’s a growing body of evidence that suggests cooperation is at least as important as competition when it comes to all kinds of evolutionary adaptation. If that’s true then one implication might be that cultivating a spirit of competition in our sales organization (e.g. sales contests) could actually be counter-productive.

Maybe Darwin and Deming are both right in ways that sales executives today are only just beginning to understand. If so, we might be poised to see our sales organizations undertake some radically evolutionary adaptations as the twenty-first century business environment continues to change dramatically.

If you agree then please stay tuned.