The W. Edwards Deming Institute Blog

Why ThoughtWorks Eliminated Sales Commissions

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Martin Fowler offers insightful details on the problems with using sales commissions (click on the right arrow button at the very top middle to see the next slide). Some quotes from his presentation:

there are serious problems with the sales commission model, problems that led ThoughtWorks to get rid of all sales commissions in 2013

From a leader’s perspective, it’s better to move an experienced salesperson from easier work to harder tasks, or to get them to spend time mentoring less experienced staff. But doing these things makes it harder to make quota, so the salesperson’s incentives aren’t aligned with the needs of the office as a whole.

Commissions set up a competitive environment where salespeople are encouraged to look after their own commissions first, reducing cooperation between them.

Commissions can act as deterrent from selling innovative solutions. Such things, whether new products or unconventional approaches to service delivery, are often more difficult to sell.

we’ve found that not having commissions has already been a big factor in helping us to recruit partnership-oriented salespeople.

This is another instance of a technology company providing a well reasoned explanation for why they are better off without sales commissions. Martin mentioned an article by Joel Spolsky on why Fog Creek software decided to eliminate sales commissions. We referenced that article last year, in: Eliminate Sales Commissions: Reject Theory X Management and Embrace Systems Thinking.

There is a very good book on Marshall Industries getting rid of sales commissions and how that allowed for more systemic focus on the companies customers in the early days of business on the web: Free, Perfect and Now by Robert Rodin (who also served on The W. Edwards Deming Institute board for a few years). You can often get a used copy of the book for just a few dollars. The book offers plenty of value today.

Related: Podcast with Kelly Allan on Dr. Deming and Peter ScholtesThe Trouble with Incentives: They WorkReward and Incentive Programs are Ineffective — Even Harmful


Categorised as: psychology, respect for people, systems thinking


2 Comments

  1. […] Why ThoughtWorks Eliminated Sales Commissions by John Hunter – “This is another instance of a technology company providing a well reasoned explanation for why they are better off without sales commissions.” […]

  2. […] How to Use the PDSA Improvement Cycle Successfully – Why ThoughtWorks Eliminated Sales Commissions – W. Edwards Deming on […]

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