The conceptual key to unraveling all of your sales management problems

If you’ve been paying attention over the last several years, you’ve probably Apple-logo1noticed that more and more businesses are advertising that they don’t pay sales commissions to their salespeople. Sometimes, they will use advertising to tout the policy, citing a more relaxed buying experience as a benefit to the customer. More often, they’ll simply state that they don’t pay commissions in a way that suggests the benefits of not doing so are self-explanitory.

In fact, the most successful operation in the history of retailing — the Apple Store — made the calculated decision to not pay commissions before the doors of the first store ever opened:

At Apple, the decision not to offer commissions was made, Ms. Bruno said, before a store had opened. The idea was that such incentives would work against the company’s primary goals — finding customers the right products, rather than the most expensive ones, and establishing long-term rapport with the brand. Commissions, it was also thought, would foster employee competition, which would undermine camaraderie.

In other words, Apple came to the conclusion that sales commissions act as a structural barrier between a company and its customers.

Traditionalists might argue that sales commissions are an integral part of the culture of sales, that they provide the motivation that salespeople need in order to do their jobs… but Apple’s unprecedented sales success certainly calls that argument into question.

Eliminating sales commissions is a strategy that we’ll be examining in detail on this blog over time. (As you know, it’s one of the five fundamental axioms in the Teamwork Selling Manifesto.) For right now, though, just consider this: Paying sales commissions is simply a business convention. It’s not required by law, it’s not universally practiced, and it’s by no means been proven as the best way to compensate a sales organization.

Just let the thought marinate for a while: There are other ways to compensate professional salespeople besides paying commissions. Once you wrap your head around that idea, you might find that the other pieces of the sales management puzzle suddenly get a lot easier.

Building tomorrow’s sales organization today

The past is a foreign country: they do things differently there. (From The Go-Between, a 1953 novel by L. P. Hartley)

Piece WorkAt the turn of the last century, “piece work” was the rule rather than the exception in American manufacturing. In other words, factory workers were paid based on the number of inventory items they were able to produce or assemble. It was an approach to compensation that seemed to protect manufacturers from the risk of unproductive employees. By the middle of the century, however, manufacturers abandoned piece work in favor of hourly pay.

Of course, we know that the change wasn’t motivated by any sense of altruism. Instead, it was motivated by the counterintuitive realization that an emphasis on raw productivity was expensive and, ultimately, counterproductive. Manufacturing is a process. Like every process, it needs to be viewed from end to end. When companies started doing so, it became clear that the best results were achieved when all the elements of the process were calibrated to effectively work together. Driving productivity in one single aspect of the process  — as piece work sought to do with labor costs — instead produces suboptimal results. Today, the idea of piece work seems altogether outdated and misguided.

In fact, the philosophy behind piece work has been abandoned in the modern corporation altogether with one notable exception: The sales department. Using a specialized brand of piece work known as sales commissions, our sales organizations are paying their salespeople based on a ideas that everyone else in the corporation ditched more than a half century ago. Justifications that were widely discredited by the end of World War II  remain the basis for the compensation plans that most corporations still use to maximize sales productivity. In fact, forward looking businesses are beginning to realize that sales commissions are every bit as outdated and misguided as piece work on the factory floor.

In this blog, I’ll be outlining an approach to sales that’s optimized for the twenty-first century. It’s a philosophy I call Teamwork Selling and it’s based on five simple premises:

  • Business-to-business relationships need to be generated and maintained at an organizational level, not at a personal level.
  • Commission-based sales compensation places unnecessary barriers between a company and its customers. It’s counterproductive and is the single biggest impediment to effective sales management.
  • Sales is a process. Effective sales managers are skillful process managers.
  • Successful sales organizations use information to enhance customer experience and improve sales results.
  • Effective sales management means using all of your resources intelligently.

I’m convinced that tomorrow’s sales organization will look far different than today’s — not just in the area of sales compensation but in their entire approach to interacting with customers. It’s time to move away from a model with its roots in the nineteenth century and, instead, think about building a sales organization designed from the ground up for the twenty-first century.

History and the world of technology both provide us with glimpses of what a more modern sales organization might look like someday… but why wait? I’m looking forward to exploring these ideas with you, getting your feedback, and making a serious attempt to move the state of the art forward.