[edw519]

...and are less worried about who is going to buy right now...

So you implemented a system that makes people less worried about the most important thing to worry about?

OP makes many fine arguments about the pros and cons of commissions, but this one little nit trumps them all.

There are many reasons for businesses to suffer and eventually die: capitalization, profitability, positioning, etc. but insufficient revenue is the biggest poison of them all.

I always thought of revenue as the water level in a creek. Enough covers all the ugly rocks below. Insufficient exposes all other weaknesses.

It sounds like Fogcreek must be doing rather well for this to work and I'm happy for them. But it makes me wonder: if revenue ever starts failing to meet projections, how soon will commissions be re-instituted to stop the bleeding?

[EDIT: Some of the replies below imply that I overlooked the words "right now", but that was exactly my point: like oxygen, "who is going to buy right now" is the most important thing to worry about. Enlightened organizations may be able to ascend Maslov's Hierarchy of Needs, but as soon as sales people worry less about Level 1: Revenue Right Now, I begin to worry.]

[tghw]

The emphasis is on right now. We definitely care who buys, but without commissions, there's a lot less pressure to get them to buy right now. That helps us get better customers because we take the time to answer their questions and help show them how our products can solve problems for them.

In the long run, this is a much better situation for us. The customers are, on average, happier, which means they keep coming back, they recommend us, and they need less support.

[jxcole]

I disagree strongly, even after your edit. Revenue right now does not ipso facto translate to a better or more sustainable business. Google is a great example. They could plaster their front page with advertisements which could, quite possibly, generate more revenue right now. But they know that users having a good experience right now will bring them back tomorrow. So they put off some possible ad revenue in the hopes that their users are more likely to continue using their service.

The same thing could be said of any company. It is possible to drive too hard to make a sale and alienate your customer. Right now you may benefit. But later down the road you will probably develop a bad reputation.

[swombat]

Actually, plastering their home page with ads would most likely cost Google revenue right now, because they will get a far higher conversion rate on their ads once they actually know what it is you're looking for. And once you've searched, you might notice that the page is indeed plastered with ads.

More importantly, we're talking about salespeople hired to scale up a proven business model, not entrepreneurs exploring different ways to make money.

Focusing on the "right now" as an entrepreneur can cause all sorts of issues, but if you hire a salesperson to sell your known product to a known target market based on a known process, they better fucking well be focused on closing the sales right now. It obviously depends on the industry, but I'd say that in most cases in B2B, without the drive of a salesperson trying to close the deal right now, every deal will take twice as long and half the deals will probably never close at all.

[AnonSales]

> we're talking about salespeople hired to scale up a proven business model, not entrepreneurs exploring different ways to make money.

I don't think it was intended, but that's a condescending statement. That's like saying "I'm looking for developers to just write some code, not find ways to do it better." A good salesperson should be looking for different ways to make money for their client, their company, and effectively (profit sharing) themselves.

Additionally, most sales managers are promoted sales people, not necessarily cunning business people. A "known process" rarely exists.

ps, I'm a big fan of your blog and contribution here, so please go easy on me.

[swombat]

I don't mean it as condescending. Sales takes a lot of creativity and skill - but still, if you're hired by, say, Fogcreek software, to sell the Fogbugz product to enterprises, the product is known, the customer base is more or less clear, and the process to get them sold has probably been practiced hundreds of times before you're hired. There will always be unique quirks to every client, but compared to the levels of uncertainty of entrepreneurial sales, you could say that every sale is pretty much the same.

Making a sale still takes a lot of skill and effort - and, even more, it takes tenacity, and drive, and a very strong desire to actually close rather than spend months and months waiting for the client to make up their mind. Sure, you might lose some clients by pushing for the close (though with experience, you know which ones will respond to it), but at least it then frees up your time to pursue other prospects who can be sold more easily.

I don't think that makes salespeople inferior to programmers. These are two different kinds of jobs with two different sets of parameters. Programming is project-based work, where you aim somewhere and you go there and then you're done. Sales is process-based work, where you have an infinite pile of leads to go through (and if the leads run out, you go and generate more), and selling more today doesn't mean you sell have less to do tomorrow. I find the latter much more difficult to do.

To put a final nail in the idea that I look down on sales - both my girlfriend and my ex-girlfriend are salespeople. Not that that's why I dated them, or anything, but it'd be hard to be with them if I looked down on their profession ;-)

[chc]

Although you have a point, I think you take it too far. Many of the worst decisions I have seen salespeople make were based on the drive to get someone to buy now rather than, say, next week. They even knew that rushing things was going to be bad for the customer, but the salespeople's interests didn't align with the customer's.

If you pressure someone into a sale now and they decide to leave soon afterward — perhaps even demanding a refund or issuing a chargeback — you've probably lost them for at least a year, and then the company is worse off than if you hadn't made the sale at all. But if you take a little while to make sure you get it right, the lost week or month will get canceled out by how happy they are with what you've given them.

So you're absolutely right that, all other things being equal, a sale right now is better than a sale tomorrow. But all other things are not always equal, and if you try to force every peg you find into that round hole, you're just going to end up with a lot of broken pieces.

[bcrescimanno]

I disagree with your edit; with the quick adage that it's far easier and cheaper to retain a customer than create a new one. It sounds to me like Fog Creek has a mix between sales and account management (but so do a lot of companies that I've come across). If your sales team is also working in that account management role, retaining their clients should always be high priority even if those customers wont' be up for renewal / another contract for some time.

Moreover (and I'm reading between the lines a bit here) I think part of that statement is referring to sales people ignoring the "hard" sales and focusing only on the "easy" sales. "Are you ready to buy? No? Ok, I'll call again in 6 months" becomes, "Let's talk about your concerns so that maybe you'll buy in a month instead of 6."

[kokey]

I think it also depends on what stage a business is at. I think if you are in an initial high growth period the emphasis should certainly be on the 'buy right now' customers, these are new customers trying out a new company or customers you are taking off a competitor. I think commission structures are more appropriate during this phase, the business still needs to find what type of customer it works best with, and it needs to get a critical mass of these, and this is mostly a numbers game.

However, there is a point where you've reached a certain critical mass, where your happy customers market for you, where your own marketing and presence sells the company. Like Fog Creek, which is now an established and known company. At this point you will do better at growing your customer base through marketing instead of commission driven sales, where customer service to the existing customers will do the selling for you, and changing the pay structure of your sales people will align them better to this approach. It also allows you to convert your customer base slowly to those you know will remain with you for longer. I think you still need to keep statistics on sales performance, and deal with bad performers and promote good performers, but these should be closer to a bonus structure and work over longer timescales, like the rest of the staff.

[JoachimSchipper]

Apparently, they've had "record months" since implementing this system.

[samaparicio]

To me, the article is about 1 or 2 years too early. It provides great detail about all the pros and cons of judging the choice in advance, but no evidence that they made the right choice. Unless Spolsky is ready to start judging the performance of a sales team by some metric other than revenue.

[funkah]

You've really gotta be looking for something to disagree with if that's what you've decided to hang your hat upon. The words "right now" were emphasized in the original sentence for a reason.

If taking away commissions didn't hurt sales, why would reinstating them fix some hypothetical sales problem? This makes no sense.

[swombat]

If taking away commissions didn't hurt sales, why would reinstating them fix some hypothetical sales problem? This makes no sense.

Because the reason why sales didn't drop might be because of wider factors that outweighed the removal of commissions. Once/if the "water level drops" and management start panicking, they might consider reversing their position on sales commissions, at least to see if it makes a difference for the better.

Seems like a pretty obvious line of thinking to me.