Commissions: A Barrier to Your Sales Team’s Motivation?

No, you read that right.
What if commissions, contrary to popular belief, actually hindered your teams’ motivation by making sales an individual sport?

In his “Manifesto for a Reversal“, American journalist Daniel Pink proposes to challenge the sacred commission-based compensation system for sales teams. Like him, we must question established patterns, revisit codes, and think “outside of the box” to find new ways to increase our productivity and sales.

Through best practices and an original idea, we invite you to discover what truly motivates your sales team.

Boosting Sales by Eliminating Commissions

Let’s consider Redgate Software, a software company for programmers, founded in 1999 by Neil Davidson and Simon Galbraith. Initially, the sales management compensated its teams with a direct commission system, which eventually became so complex that it overshadowed the primary goal: software development and sales.

In short, salespeople waste valuable time calculating the best return for themselves, which negatively impacts the company’s overall productivity. Davidson wrote on his blog at the time: “That’s what our compensation system looked like – a gigantic, complicated medieval labyrinth, based on a flawed premise.”

A Flawed Premise: Commission-Based Compensation?

Without Commissions, What Motivation?

Davidson then decided to develop another system: he approached his sales force with the idea of paying them a fixed salary, supplemented by a profit-sharing bonus based on results.

When he spoke with his salespeople, Tom replied: “That’s a good idea! But James will never agree; he’s only motivated by money. Take away the commission, and he’ll leave.”
When he spoke with James, he said: “Good idea! But Tom won’t like it; his only motivation is money.”

Would this compensation system lead salespeople to believe that only money motivates them?
Is money the primary motivator for sales teams? To these questions, an increasing number are saying no; others, like Redgate’s founder, are developing new incentives.

Supported by his sales teams, Davidson then revamped the compensation system. With the elimination of commissions, Redgate Software’s total sales increased – only two out of 150 salespeople left the company because they were uncomfortable with the new system.

Another company, System Source, also decided to implement a commission-free compensation system, and its founder, Weinstein, observed the beneficial effects: “Inherently, individual commissions discourage teamwork. Why help ‘Marie’ close a client when she alone will reap the benefits of the sale? Commission-based pay divides salespeople.”

Indeed, this is one of the possibilities opened up by the abolition of commissions: teamwork and collaboration to achieve a common goal. In this way, by fostering teamwork, you can improve your sales team’s motivation.

The disadvantages of an overly complex commission system:

These elements, combining team spirit and motivation, allow sales to refocus on its primary function: meeting a customer’s need, and not just earning a commission. Indeed, while the commission-based compensation system has certain advantages, an overly complex system, with personalized bonuses, commission tiers, period-based commissions, etc., is easily ‘turned’ to their advantage by salespeople who can exploit numerous loopholes to achieve their objectives (notably by playing on sales timing).

It is also a system that can be inherently unequal. Indeed, some salespeople are advantaged by their sales territory, while others are not. However, attempting to regulate these inequalities by creating, for example, a personalized compensation system can lead to the opposite result. This strategy is not without logic, however: since each salesperson does not have the same motivational driver, an individual system might seem engaging.

However, in practice, the larger the sales force, the more difficult, time-consuming, and expensive it is to implement such a system. Furthermore, once completed, even greater disparities can result. A commission-based compensation system can then raise questions and complaints from employees, risking a slowdown in the organization’s overall productivity and performance.

The benefits of eliminating commissions:

These are the two main points to remember:

• The commission system is not necessarily the best motivation for the sales force. Consider prioritizing other motivational drivers for better performance.
• A commission-free compensation system allows your sales team to collaborate, and thus perform better. Furthermore, it helps build team spirit which, when well-maintained, constitutes the best possible motivation.

So, should every company eliminate commissions? No, obviously. However, if your company is experiencing:

• Difficulties managing team rivalry,
• A compensation system that creates more problems than it solves,
• A severe lack of motivation from some salespeople,

Why not try a new system? The regular organization of innovative sales challenges can effectively replace commissions. Original rewards and prizes also lead to better results, with higher motivation.

So if you’re looking to improve your sales team’s motivation without revolutionizing your entire compensation system, it’s possible! You can devise innovative, collective sales challenges that value teamwork more than individual performance.
For this, you can use a digital and ergonomic platform for sales management and engagement such as Incenteev. Be a leader, be a visionary.

To solve your sales team’s motivation problems, download our White Paper: Building a Highly Motivated Team in the Digital Age