Why salespeople are on commission?
Because it's one of the rare jobs where performance can be easily and objectively measured.
Most of the arguments in the article could just as easily apply to a fixed salary (jumping ship for better pay, fighting over who gets the big deals etc). And I would argue that the theory y vs theory x argument, that good employees are by nature more intrinsically motivated than just in it for the money, probably holds true a lot more for programmers than for salespeople. By definition, sales is about getting customers to pay money, so for a salesperson it's probably a good thing to be motivated by money.
The real question about commission-based compensation is: Is what I measure, and pay people for (this quarter's revenues) really what I want to achieve (maximum long-term profitablity)?
If you pay by commission, you will probably get higher revenues right now, but also more of the problems mentioned (mostly overselling to customers that arent really a good fit for the product).
I'd say it depends on the situation the company is in. If you're an established, profitable software company like FogCreek that wants to build long-term relationships with happy customers, a fixed salary is probably better. But if you're a startup with 2 months of runway left, desperately needing some revenue right now, you're probably better off paying commissions to your salespeople.
Most of the arguments in the article could just as easily apply to a fixed salary (jumping ship for better pay, fighting over who gets the big deals etc). And I would argue that the theory y vs theory x argument, that good employees are by nature more intrinsically motivated than just in it for the money, probably holds true a lot more for programmers than for salespeople. By definition, sales is about getting customers to pay money, so for a salesperson it's probably a good thing to be motivated by money.
The real question about commission-based compensation is: Is what I measure, and pay people for (this quarter's revenues) really what I want to achieve (maximum long-term profitablity)?
If you pay by commission, you will probably get higher revenues right now, but also more of the problems mentioned (mostly overselling to customers that arent really a good fit for the product).
I'd say it depends on the situation the company is in. If you're an established, profitable software company like FogCreek that wants to build long-term relationships with happy customers, a fixed salary is probably better. But if you're a startup with 2 months of runway left, desperately needing some revenue right now, you're probably better off paying commissions to your salespeople.