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Getting commissions does not necessarily mean getting paid more. Often people paid on commissions have smaller base salaries. Payments with commissions are a m
by matco11 9y ago
Getting commissions does not necessarily mean getting paid more. Often people paid on commissions have smaller base salaries.
Payments with commissions are a managerial tool to incentivize a certain behavior, the same way there are other structures to help organizations behave in a certain way.
For example, you can incentivize people based on an easily measurable metric fully under their control (e.g. $ sales, customer support tickets solved, factory throughput, etc.), or choose to align everyone's behavior (e.g. Profits of xyz division of the company - hardly under a particular person's control).
That's the same principle behind giving CEO and other senior executives incentives based on stock options: you want them to create value and get share price up, while leaving them maximum freedom on how to get there.
Each approach has its pros and cons in terms of how easy it is to explain to employees, track the metrics, create a collaborative environment (or not), incentivize intra-company communications (or not), and the impact it has on workforce productivity (also, it depends on how you measure productivity...)
In designing an incentive plan, one has to decide which one of these factors one wants to prioritize.
Because of the salesperson role, and because of the type of mindset/profile these people predominantly have, it is easy/common to have their pay structure heavily based on commissions.
Looking at things from the other side: if you ask a salesperson about compensation structures, possibly she would be wondering why engineers' or designers' pay is not linked to sales, so (instead of working on interesting and beautiful stuff) they would prioritize shipping features that help her sell... (as an example of not so beautiful designs that sell more think about the design of certain low cost airlines websites)
...Then again, possibly, the salesperson only knows what would help her sell more easily TODAY, and not what she is going to need in a year's time... you need an engineer not directly incentivized on current sales to think about that!
- dkersten 9y agoThe difference is that often sales commissions have no (or much higher) upper limit. That is, if you are skilled enough (and lucky enough, for sure, since there are certainly many factors outside of the salespersons control), then they can potentially make a large commission. On the other hand, a salaried engineer has a hard upper limit (their salary + any bonuses that may exist) which can only be raised through a promotion or renegotiation. A problem for me is that there's little incentive to work b tons what my contract stipulates and what my manager feels is acceptable productivity (and whatever I need to get bonuses, if I get bonuses at all), because I get the same compensation (in terms of money or time off or whatever -- I don't get to leave early if I finish my work early: I move on to the next task instead) no matter how hard I work or productive I am. So why would I wear myself down by working harder if I can be less stressed and work less hard for the exact same compensation? At least a commission-based role puts some of this into my hands. If I feel I can make more sales by working harder/longer/faster/smarter, I can get paid more.