> Mitch Little began questioning the received wisdom on sales commissions in the late 1990s, shortly before he became vice president for worldwide sales and applications at Microchip Technology, a large semiconductor company headquartered near Phoenix. He oversaw 400 salespeople whose compensation plan was the industry standard—60% base salary, 40% commissions.
> “That made sense 40 years ago, when the Fuller Brush salesman went door-to-door,” Little told me. “But the world of business-to-business sales has shifted fundamentally.” So in an act of sacrilege for a onetime sales guy, Little killed commissions altogether. He established a new plan in which salespeople received 90% of their compensation in a high base salary, and the other 10% was linked to corporate (rather than individual) measures such as top-line growth, profits, and earnings per share.
> The result? Total sales increased. The cost of sales stayed the same. Attrition dropped. Retention rose.
> The proponents of ditching commissions believe they foster negative behaviors, such as focusing on an individual’s profit over the company’s, emphasizing short-term outcomes and encouraging unproductive competition among sales representatives. Even companies that pay commissions can face costly turnover as representatives chase more lucrative offers.
> In the year since we dropped the commission system our sales have gone up. In fact, four of the last five months have been record months. We can’t reasonably say that our record sales were caused by this change, but we can reasonably say it didn’t hurt, and that’s worth having a hard think about in your own company. There is no guarantee that this will work for everyone, but it’s unlikely to be a disaster either.
> 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. And, most worrying, we created a heavy disincentive to do all the service stuff that makes customer service shine. Why would you want a system that sets up after-sales service as competition against new sales, especially if you have a small sales team? Reputation and retention, after all, are both paths to revenue.
> Removing commissions has changed the sales team. It has taken their focus off their compensation. They have all that administration time back for more useful things. They take a longer view of the value of a prospect, and are less worried about who is going to buy right now. They feel less stress about taking vacation. They don’t quibble among themselves over accounts. And best of all, they feel more integrated with the company.
Daniel Pink's ["To Sell Is Human"](http://www.danpink.com/books/to-sell-is-human/) makes a strong argument against commissions, which is echoed in these articles:
https://hbr.org/2012/07/a-radical-prescription-for-sales
> Mitch Little began questioning the received wisdom on sales commissions in the late 1990s, shortly before he became vice president for worldwide sales and applications at Microchip Technology, a large semiconductor company headquartered near Phoenix. He oversaw 400 salespeople whose compensation plan was the industry standard—60% base salary, 40% commissions.
> “That made sense 40 years ago, when the Fuller Brush salesman went door-to-door,” Little told me. “But the world of business-to-business sales has shifted fundamentally.” So in an act of sacrilege for a onetime sales guy, Little killed commissions altogether. He established a new plan in which salespeople received 90% of their compensation in a high base salary, and the other 10% was linked to corporate (rather than individual) measures such as top-line growth, profits, and earnings per share.
> The result? Total sales increased. The cost of sales stayed the same. Attrition dropped. Retention rose.
http://www.nytimes.com/2013/11/21/business/smallbusiness/for...
> The proponents of ditching commissions believe they foster negative behaviors, such as focusing on an individual’s profit over the company’s, emphasizing short-term outcomes and encouraging unproductive competition among sales representatives. Even companies that pay commissions can face costly turnover as representatives chase more lucrative offers.
https://blog.fogcreek.com/why-do-we-pay-sales-commissions/
> In the year since we dropped the commission system our sales have gone up. In fact, four of the last five months have been record months. We can’t reasonably say that our record sales were caused by this change, but we can reasonably say it didn’t hurt, and that’s worth having a hard think about in your own company. There is no guarantee that this will work for everyone, but it’s unlikely to be a disaster either.
> 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. And, most worrying, we created a heavy disincentive to do all the service stuff that makes customer service shine. Why would you want a system that sets up after-sales service as competition against new sales, especially if you have a small sales team? Reputation and retention, after all, are both paths to revenue.
> Removing commissions has changed the sales team. It has taken their focus off their compensation. They have all that administration time back for more useful things. They take a longer view of the value of a prospect, and are less worried about who is going to buy right now. They feel less stress about taking vacation. They don’t quibble among themselves over accounts. And best of all, they feel more integrated with the company.