You read this occasionally and hear it discussed in industry events, that commission in it’s current form, the carrot for performance is dead. In the UK, you can’t even say the word commission without getting evil looks like you offended the Queen. In the states, it’s subtler, but more studies come out from places like Harvard business review that proclaim only the simplest minded people would even allow themselves to be manipulated by commissions. So is it true, is commissions really on its last legs?
The genesis of this belief seems to have come from the implosion of the financial system back in 2009. People became greedy and rather than be safe, they chased the dollars. I dare say that proves commission to be highly effective. What happened subsequently was a governmental backlash on this behavior.
They put in checks and controls, effectively causing people to look at non cash based incentives and hence the birth of gamification. Some way to trick people into competition but, not really competition.
Proof 1– Government Regulation
Next, let’s look at why the big brained scholars at Harvard business review think that commission is dead. According to their book on sales and commissions, they proclaim commissions are ineffective. I will caveat this with they say it’s ineffective for team based selling and for long-term sales cycles.
Sighting several organizations that have removed commissions to see their profits swell by millions of percent’s (gross exaggeration). The logic behind this goes, that if I get commissions on a deal, I am going to focus on my deals and not give these deals to the best person available to close them -hence maximizing my own wealth and not the company. Sure, I could see that. The other is that I don’t want to split commissions – nobody does.
They also discuss the problems of long term sales cycles and commissions. If you have to wait 6 months to a year for your deals to close, if you are paying commissions, it could be rough going. Of course, many sales cycles like that are substantially large in terms of revenue. What you tend to see is those people are highly paid on base, and lower commission. So they espouse to suggest simply removing the commission to have greater team cooperation, stop cannibalization and enjoy a company kumbuya.
Proof 2 – Harvard business review wrote it, so it must be true
Finally, we look at the Millennials. The generation raised on the Internet, that values social/wait – kind of social (if you call sitting and talking on the internet social) interaction. They want to feel a part of the company. They prefer accolades, and participation trophies. I think gamification happened to appease this group. Logically they would seem to be a group completely un-phased by commissions – they have no need for money or material things. They have their parents to rely on for this, you know, Gen x and baby boomers. So commissions for this group, or even the need of money, seems like a foreign concept. Motivation happens in different forms.
Here, you have to ask is if a person is really a sales person, or just someone who is good at relationships. Sales are so much more than that, and a person has to have that wired into their head. So what does that have to do with Millennials? Well, they, like others, just don’t have that wire. They are more about groupthink and big brained concepts than the task at hand. They want to be recognized, given their pat on the back, and this is critical to making them happy. Guess what, a pat on the back makes everyone happy. This group in particular doesn’t seem to be motivated by money and it may have to do with the change in sales from widget based to sophisticated sale. Things have just got more complicated and Millennials are in the middle of it.
Proof 3 – Millennials don’t want money, so why would they want commissions
This all leads me to the question of whether commissions is really dead? What do you think? Is it crucial to human nature and performance or outdated?
- On June 2, 2016