That's a really good question. The short answer is, "it depends."
In my mind, the problem is that commission is an incentive to do whatever it takes to close the deal -- especially if you're in an uncapped commission with accelerators. For example, if I'm paid 10% on my first $300k in new business, 15% on $300-499, 25% on 500+, I'm doing everything I can to hit $500k, right?
I (the commissioned salesperson) would lie to my mom if I'm at $490 with a $12k deal on the table. I'll lie to you, and I'll tell you things about our product/service that aren't true. You'll do this one project with us, I'll get my gigantic commission check, and then you'll a) never come back b) tell everyone you talk to about us and c) not affect my commission check. I'll also put on my resume that I "exceeded monthly quotas" and smile. Remember, I'm here to get paid. That's why we're in a commission-based role. [edit: Please keep in mind that I'm giving accounts of what I've seen, not necessarily what I've done. I wouldn't lie to my mom. Others would.]
I believe you can mitigate that problem by paying out over a term, or upon certain achievements (deployed, customer gave us a positive rating, etc.). However, what additional problems does that create in your organization? Is it good or bad to have the salespeople managing (micro or otherwise) the delivery ("selling is not delivering")? Does that compensation model get too complicated?
Call me an optimist, but I wish companies would hire people that want to truly evangelize their widgets, put them on a base salary, and then measure performance. Sales isn't rocket science, it just takes someone who is comfortable talking to people...and when you're selling something you believe in, that's really easy to do.
Just for the sake of argument, what if it were a pro rata commission on the lifetime value of the customer, paid continuously as money comes in the door, and only while you are employed with good standing?
What I'm really getting at: is the problem with commissions themselves or the way in which commissions were structured at the places you worked? Putting aside cash flow and accounting issues, could you design a commission structure that incentivises correct behavior?
Equity would get complicated, quickly. Profit sharing seems to be an easier route.
I'm not sure I agree with sales being in product development. You run the risk of having a sales person champion an idea as the greatest thing on earth, only to find out the market size is exactly 1. The salesperson should, however, be concerned with the customer's satisfaction long after the deal is signed.
> For example, if I'm paid 10% on my first $300k in new business, 15% on $300-499, 25% on 500+, I'm doing everything I can to hit $500k, right?
Why would you do that if the 25% is only on the 500+ stuff? It's not like those $2k at 25% ($500) are going to be very significant compared to the 300k@10 ($30000) and the 200k@15 ($30000 as well).
If I give my sales people a cut of the lifetime value of a customer instead of the immediate contract, would that be better or worse?