I speak with CEO’s and senior executives on a regular basis regarding compensation issues – especially when it comes to paying high powered sales leaders. While some CEO’s truly understand the reasons that successful sales performers should be highly compensated, many still just don’t get it. During this economic downturn, we are now beginning to wind out of, many of our clients are still engaging us on search assignments to find and place proven sales talent that can positively impact the revenue of the company. Let’s face it, nothing happens until something is sold. Good sales people make a lot of money! Period.
Back to my point. In my career, I have seen first hand how a compensation package designed for individual contributors and sales managers can really move the needle on the revenues of a company. There is constant pressure to drive revenue and organic growth, particularly with publicly traded companies who have to deal with shareholders and analysts who expect a return on their investment.
So the question is: Why do some CEOs struggle on paying high commissions and bonuses to those who meet and exceed their sales objectives? I have a few examples I have seen firsthand that just baffle me…
- Sales People Should Never Earn More Than the CEO: That is so old school and counter to what is in the best interest of the company. If a sales person earns more than the CEO, he or she probably deserves it, and the company is really the winner anyway. Increased sales and profits means the company can gain new market share, displace a competitor or enter a new market or line of business because of the success the sales person had in selling the company’s products and services. Who cares how much money they are making? Well, in some cases (sadly) the CEO does. I think it gets down to ego. Sad but true.
- It Sends the Wrong Message to Other Departments: What? Some believe that the finance or operations people work harder than the sales person and therefore should earn more than those calling on customers in a pure sales role. That is total BS. They have this vision of sales people playing golf or taking customers to dinner and – hell, that’s not work. Is it? Operations people deploy resources to deliver goods to new and existing customers as a direct result of what gets sold. Period. Finance generates invoices, creates accounts receivable and is able to produce a better looking profit and loss statement every time the company is able to recognize revenue (again) sold by the sales person. That’s the way it works. Get over it.
- Sales People Don’t Deserve to Earn That Much Money: Selling is not hard work (yuk yuk), and sales people don’t deserve to make a lot of money while others are required to deliver goods and services or install products sold by the sales person. The sales guy makes the sale and dumps it in someone else’s lap to deal with and exits the scene. Correct (job well done). So what? Here’s the reality. Many people don’t have what it takes to be a successful salesperson. They wouldn’t even know where to start. Actually, they are better at beating up on those in sales than delivering their own value equation. Beat up on sales. Counterproductive? Jealous? Yep. Pure and simple.
I certainly don’t believe in paying something for nothing. Never. However, successful sales people need to be paid based on the value they deliver. If they over deliver – they should be overcompensated for the extra revenue and profit they created. Plain and simple. And for those who disagree with how sales people should be paid – I have some advice:
- Why don’t you try it. Suit up, ask for a territory and a quota and see how well you do. If you are really good, you will see how hard it can be to be in sales and why good sales people earn a lot of money. If you fall on your face, you will likely still find reasons why sales people earn too much.
- Get rid of all sales people in your company and just wait for the bottom to fall out. Trust me, it will. Wait. I know. Maybe customers will start calling YOU and begging YOU to sell them your goods and services. Yeah. That should work. NOT!
In the end – in sales, what gets measured gets done. Don’t make the carrot a joke when it comes to compensating sales people. They will figure it out and leave. If they are good – that could spell trouble. Pay sales people what they are worth and for the revenue they deliver, and your company will experience positive results for every employee, shareholder and for your customers. It works! Trust me.
Having been in sales for 10 years and done pretty well I know it’s hard work. Hard, grinding work. If you’ve never been in sales it is hard to understand how you have to be “on” 24/7 with the client – even when you can’t stand them – or they are rude, insensitive, etc.
But the one thing no one internally really gets is the risk involved with sales. No one has more risk associated with their job than a sales person. They have the benefit of money when they do well – and getting canned when they don’t. And they don’t have to do poorly very long before they are told to hit the bricks. Would anyone internally want that risk? Doubtful.
Not to mention the transparency associated with sales performance. There are few if any jobs in any company (CEO included) with such transparent metrics on performance.
Everyone in the company knows who’s selling and who isn’t. I don’t think many folks would like to have their performance review put up on the white board or on the company intranet.
Sure – there are probably some folks that fall into big accounts or big sales – but those same folks could also be on their butt next quarter.
It’s kinda like the character in “a few good men” – you want those sales people out there selling – and you want them to take the risk, and put up with company-wide criticism on performance – ‘cuz you can’t handle it.
Walk a few months in a sales person’s shoes and you’ll understand the pressure, risk and the reward – of doing a very tough, tough job.
Working for a sales driven company (direct mail advertising no less)—I can say:
**Sales is HARD
**Sucessful sales reps deserve to make TONS of money for the risk they take on. Operative word is successfull…
**Don’t knock it till you try it…
**If your C-Suite doesn’t get that—-best look for another place to work because you have officialy fallen into a rabbit hole where up is down and down is up…..
Paul and Dawn: I agree! Sales is very hard, risky and not a cakewalk by any means. Companies that don’t get that will always be behind the curve in revenue growth, retention of revenue producing sales professionals and in keeping and market share. Pay ‘em well! Always! Thanks for your post.
Thank you.. very well put. I was laid off from my last sales position and when I went for over a year with not finding a new position, I made the bold move to start my own company.
Here’s what I found: Companies either weren’t hiring sales at all or were hiring commission only sales people. I may be in the minority, but I think companies who don’t pay a base salary to their sales people essentially are discrediting the profession. I’ve been a sales professional for way too long to give my expertise away. Sales is more than “order taking”.. there’s a lot involved in developing and maintaining the relationship, etc.
My other current “ire” with companies was brought up in a conversation with my husband who is also in sales.. he had a great year last year – one of the top earners. His reward? Being told that he made “too” much money and that the bonus structure was being changed. (Insert Captain Obvious statement here).. well, if he made a lot of money, doesn’t that mean you, the company, did as well??
I agree, Tim.. all the non-sales folks out there who think our job is easy and overpaid.. grab a territory, go out there & let’s see how you do.
I don’t really see why this argument is only being directed towards salespeople. If you deliver vastly more than your peers, you should be paid vastly more. The department you’re in shouldn’t matter. It just happens that sales performance tends to be easier to quantify than other positions.
I fully agree. Sales is a difficult, at times gut wrenching profession. I don’t disagree with all of the comments above. The only thing I’m curious about is how for years, HR people tell the rest of us that monetary rewards are not the best motivators. Most employees, no matter how hard they work or how much they contribute to the bottom line must be satisfied for 2 – 3% per year.
What makes sales people, executives and employees in the financial services industries different?
Kristen: I too, have seen where sales people did such a great job and made a lot of $$ – the reward was to cut back on their compensation or cut their ability to make good money moving forward. Not smart. Nope! That is a lose-lose proposition.
Brian: I wrote this article to make a point that in most companies nothing happens until something is sold. I strongly feel that sales people that deliver top line revenue for a company should be highly paid. I also feel that anyone in a company that over-delivers in other departments should also be rewarded for their efforts.
August: As I stated earlier – the biggest difference in the functional roles in your reply is that sales people deliver revenue – the lifeline to help companies grow and make more profits which benefits everyone else in the company and the shareholders for the financial risks they took by investing in the company. The CEO and other senior executives usually make their $$ on equity as the value of company increases. I still feel the sales team (if they deliver) should make a lot of cash compensation.
Thanks to all of you for your comments!
There’s nothing preventing a numbers-producing sales producer from firing his employer. Most compensation plans I’ve seen have a fine-print clause stating that management reserves the right to change the plan at any time for any reason. Conversely, the rep. usually doesn’t have such leverage. But, if he or she is truly good and consistently produces numbers, then all the rep. needs to do is stare too long at the door and the boss will probably step-up. Maybe not, and said rep. can replace his employer.
Nothing wrong with that at all. It happened to me many years ago when I was a Regional VP of Sales for a SW company. Four RVP’s were hired to help turn the company around. We helped take the stock price from $3.75 to over $21.00 in 18 months. After we reached our goal – we were all asked to take a cut in compensation (the CEO started to get greedy). We all fired the company and left withing 60 days. Firing your employer when things like this happen is sometimes the only option you have! Great point Todd.
Great post, Tim. Those who can’t understand and appreciate sales rewards ultimately and simply don’t get sales.
As you say, nothing like a couple of months in the sales trenches to take care of that!
Great article! Without sales, there is no business. Period. I agree with some of the comments, that is, if your company does not reward your sales efforts… find another company!
Buildings are quite expensive and not every person is able to buy it. Nevertheless, loan was invented to support people in such kind of cases.
Sales is a field full of morons and former college athletes. No salesperson scores over 1200 on the SATs, and they have no tangible skills or qualifications. Salespeople make a ludicrous amount of money to make phone calls and hang out. It’s not work, it’s just conversation. Any middle school student has the “skills” to be in sales, as no education or qualifications are required. It’s just talking. You are a bunch of overpaid goons. You couldn’t do an engineer’s job for a day, but I’m sure an engineer could make a few sales (especially if you are a lease-based company). Ohhhh, resigning an existing customer? How’d you do THAT!? I guess you deserve your company car, trips to Jamaica, and all the other bullshit. Bottom line: salespeople are only as good as the product they are selling and the territory they are assigned. Fungible morons – anyone can do your job!
Sales Sucks -
you’re kidding me right? I’m not a Sales Pro and I’d love to say it’s easy – but it’s not… It’s one of the hardest things to do and the best sales pros get what they deserve because without them none of the rest of us – HR people, engineers, etc – are employed for very long… They have to sell to get revenue in the door.
It’s not easy. Nice rant though….
SS: Why don’t you quit your job today and see how well you do in sales? Sales move the revenue needle of companies and allow companies to hire top technical, delivery, finance, operations and others who provide tons of value to the organization. However SS, let’s be clear, nothing happens in a company until a customer buys a product of service. Nothing. Nada.
Without sales people companies would have to place their products on a shelf and just HOPE someone decides to purchase their products. That’s not going to happen. never.
In sales, Hope is Not a Strategy – never will be.
“Get rid of all sales people in your company and just wait for the bottom to fall out” – true enough. Get rid of all your operations folks and watch the same thing. Your miracle salesman might make a first sale but she’ll never make the second after the order doesn’t arrive. Or get rid of your finance folks and watch the company fold when vendors don’t get paid.
Sales is important and yes, sales is hard. That doesn’t mean that it’s the only important job in the company. Sales drives revenue but revenue only one step in the profit equation.
In my opinion, the resentment toward stereotypical sales compensation is not just jealousy (though there is some). It’s also frustration that the comp structure so often drives bad behavior. I can’t count the number of times I had to fix an over-sold project. Deliverables promised that couldn’t possibly break even much less show a profit. Sales made “as an investment in the relationship” when there was no realistic likelihood of any such thing. Decisions made without regard for the risks and costs being created in other areas of the organization. Salesmen who perpetuate the “revenue is all” myth are a risk to the company. (And that doesn’t even touch the sales made under ethically-questionable circumstances.)
Of course, telling a salesperson that he’s selling unprofitable deals means admitting that the comp algorithm was poorly designed in the first place. How many managers do you know who can admit that mistake? Easier to use the “making too much money”/market-pay excuse to rebalance the sales costs to the value actually delivered.
There may be a few companies running a bait-and-switch in their comp plans. I suspect that others just realized they were paying dearly for the privilege of losing money.
Okay, I know that the post was a good-natured rant. Sales is underappreciated. Get over it. Every department feels underappreciated. And they’re all important. That’s my counter-rant, anyway.
I agree with the 100%… Salespeople are the backbone of a company and few people realize it. Without them, there would be no business!
Good post, it was good enough that I took some notes! Go sales!
Robert and Sales Manager Training:
Most people that have ever run a business understand that nothing happens until something is SOLD. That does not mean that other key people in the organization don’t matter. That’s not the point. However, without sales – there is no business. Period.
Hi Sales Sucks:
I am a sales professional and an engineer. I can assure you that I am not a jock, earned well over a 1400 on my SAT, and earned BS and MS degrees in Computer Engineering from a strong engineering school (Carnegie Mellon) where I graduated near the top of my class. I love engineering and that is precisely why I am in sales. I sell very high end computers that I helped design as a I started my career as an engineer. I want to learn how we can make computers better for the world by immersing myself in client environments.
I understand where you are coming from and let me assure you that the most successful sales people that I know in technology have strong technical backgrounds. Most customers in technology are straight shooters and won’t give non-technical people the time of day.
Having said that, sales is not easy and not anyone can be successful. From the customers point of view, you have to be able to synchronize everything from finance, legal, product requirements, support, and get everyone that matters at your client and in your company to want to work with and trust you. There are a lot of things out of your control and there are no hard and fast rules. I am not saying that sales is harder than engineering. I am not saying engineering is harder than sales. They both require different skill sets though.
At first thought, I would tend to agree that I am relatively overpaid compared to other functions in my company. Really the sales person is nothing without his support structure and product. Having said that, the engineers and support structure don’t get paid if the sales person can’t close the deal. The relationship between sales people and their organizations is symbiotic. In the end though, it is in the engineer’s best interest to have his sales person highly motivated to bring in more profitable revenue so the engineer can be compensated more. Therefore, at a company with limited resources (every company) more compensation is going to go to the sales at companies that are interested in driving profitable revenue (most companies).
A problem I see is that both sales folks and engineers act like they are king of the world and don’t need each other. My hope is people reading this will develop mutual respect for one another and realize that teaming with one another is the best thing for everyone involved at the end of the day. Check your ego at the door, enjoy learning from one another, and have fun coming up with ways to serve outstanding value to your clients! If you can embed this attitude across your company, it will be successful
Thanks,
Maneesh
Isn’t there a chance that if a bunch of people on the sales team are making large amounts of money, it’s too easy. I understand that there are good sales people, but there are also good products. I worked on the other end. I would buy things for my company from sales people. Most of the time the sales people were useless. They knew nothing about their products. Would miss quote prices and mess up orders. But we still bought from them because they were the only company that offered their services or they were much cheaper than any competitor.
These sales people could have looked like geniuses when it was really the back office that was keeping the accounts alive.
Very biased opinion written by a sales person.
I am a CEO and am currently paying salespeople more than me and am perfectly happy to do so. However, we are also looking at repositioning our compensation methodology so that everyone in the company who works hard and performs well has the ability to impact their compensation.
Tim, while sales people are important and probably even underappreciated, I disagree with the ego salespeople have that ‘nothing’ happens until a sale or that revenue is THE most important thing in a company. First, sales people have to have something to sell. That generally comes from an entrepreneur with an idea, which then goes to some kind of ops and marketing team to get ready for the customer. Often, many things happen before the sale.
Additionally, I would rather be out of business than in a business with lots of revenue (because we have great revenue generators) but no profit. Our salespeople are top-notch, but we’ve had to really work with them to get them to understand the difference between a sale and a profitable sale.
Finally, I will recognize the risk salespeople undertake if all salespeople will acknowledge the responsibility that comes with being responsible for the livelihood of all the staff and their families.
Good article and thanks for the post, now…get back to work and sell something!
CEO
Just my two pence worth. I’m in sales, have been one of those “high earners” and I’m a member of Mensa. I wonder if that unthinking engineer could qualify for that?