[paulhauggis]

"Our salespeople all estimated that they were spending about 20% of their time just keeping track of what money was due them. There was constant horse trading."

I had to laugh at this. How is this that difficult? An excel spreadsheet with a few columns might only take a 20-30 minutes per day (if that). If it's based on a percentage, excel can automatically calculate that based on a column. I am a re-seller for a few products online and this is exactly how I calculate it. I have another sheet that tallies all of my monthly revenue. I can't imagine it being much different when selling services or products for a company like Fog Creek. You could also keep track of all names/companies, etc. here.

I'm going to offer another perspective: Fog creek basically just gave themselves a pay raise. Rather than giving salespeople a cut of the sales, they now are paying them a flat-fee.

Some people may like this because now they have consistent income. However, it's much less than what they could potentially earn. If I was a salesperson there, I would quit. I would like to see the results of this in 1 year (or 5 years). I suspect they will switch back to a commission-based system within that time-frame.

It reminds me of my brother's job. He used to work as a bike builder at a local shop here in PA. He used to get paid $10/bike and he would build many bikes per night. They switched it over one day to $11/hour and he then had no incentive to build as many bikes (and he admits didn't doesn't work as hard..because he was going to get paid the same regardless). Most people are like this.

In a way, it's like converting from free-market capitalism (you have no limit to your success) to communism (everyone is now equal).

They do this to developers all the time. Every job I've ever had has been based on salary. This sounds great, until you realize that the employer now has no incentive to keep you within 40 hours/week.

At one company, the new COO came in and announced that new working hours were an hour earlier and half-an-hour later. Everyone working there was on salary, so we essentially all got a pay-cut.

[jacques_chester]

> Fog creek basically just gave themselves a pay raise. Rather than giving salespeople a cut of the sales, they now are paying them a flat-fee.

Fog Creek have taken on the sales risk entirely from the sales staff. It's not a one-way trade.

[tptacek]

Competent direct sales people choose that career because they are good at handling that risk and like the boost in compensation they get from it.

The guy who's content with the base salary is almost the definition of a sales account manager who isn't working out.

[jacques_chester]

Sure, but my point was that it's not a one-way exchange of value. The sales staff may be paid less, but they get lower risk in return. Whether they like that is up to them.

[tptacek]

But I'm not making a moral judgement. Pay your sales team whatever you want. Pay them minimum wage; for the people who accept the job, you're still doing them a service.

My point is that you will get bad salespeople by selecting for the ones willing to take smooth, low returns over commissions.

[jacques_chester]

> But I'm not making a moral judgement.

I was addressing the parent comment to mine, which did seem to be making a value judgement.

> My point is that you will get bad salespeople by selecting for the ones willing to take smooth, low returns over commissions.

Can you back this up with figures, or is it your expert opinion?

[tptacek]

In the 3 companies I've worked at where I worked closely with direct sales teams, the ones who beat their numbers stick around, the ones who don't get fired. Your salary is the base pay you get whether you clear your numbers or not.

It's weird to call that "expert opinion". I'm not an "expert" at managing sales teams, though I've hired salespeople in 2 companies (I've never done sales or managed a sales organization). But we're right now not so much discussing my opinions about direct sales as we are talking about basic facts.

[paulhauggis]

"Fog Creek have taken on the sales risk entirely from the sales staff. It's not a one-way trade."

I suppose. But without sales, they would be out of business. They take this risk on regardless of what they are paying their sales staff (Business is all about taking risk).

I wonder what percentage they were actually giving their sales staff..10%..20%? I doubt it was over 50%, so they aren't really increasing their risk by that much.

[jacques_chester]

> so they aren't really increasing their risk by that much.

The rate of commission is not where the risk lies. Commissions are, from a short-term perspective, risk-free for the business. If the sales staff don't sell, you pay them less; the risk of divergence between revenue and expenses is lessened. The incidence of risk is pushed onto the sales staff.

If expenses are fixed but revenue is variable, then you face higher risk as a business.

In this case Fog Creek are taking the incidence of downside risk on themselves; in exchange for the loss of upside risk they will pay higher fixed wages.

[lawnchair_larry]

Without a product, they would be out of business.

[ceejayoz]

> It reminds me of my brother's job. He used to work as a bike builder at a local shop here in PA. He used to get paid $10/bike and he would build many bikes per night. They switched it over one day to $11/hour and he then had no incentive to build as many bikes (and he admits didn't doesn't work as hard..because he was going to get paid the same regardless). Most people are like this.

Well, that was dumb.

Ditching commission doesn't mean performance can't be rewarded, via bonuses for good performers, generous raises when merited, etc.