All sales bonus systems will fail due to change
Sales bonus plans for continuous growth
If sales bonus systems would be the perfect motivator, then market leading companies would only grow bigger as the sales bonus system would continue to fuel the sales(men).
However this seems not to be the case.
Could it be that sales bonus systems are not really stimulating and motivating?
Or stimulating the wrong or less effective sales actions and efforts? Not optimal ?
Even the most complex commission plans (that are hard to understand) can miss their initial beneficial goal for the company.
Salesmen will optimize their benefit
As with any mathematical system based on rules and conditions, salesmen will optimize for their own benefit.
Thus the smallest mistake in any of the assumptions made during the design and development of the bonus plan will generate less optimal sales efforts as the salesmen will optimize their bonus – not the benefit or bottom line of the company.
Their bonus is the most important.
Salesmen have no full control
On the other hand the salesman is not completely in control of the products or solutions he can propose to his potential buyers: R&D, development, quality control or production can be late in delivering the new product, version or the specific adapted solution for a market segment. Delayed delivery means fewer bonuses for the salesman.
The assumptions are wrong due to constant change
All bonus system are based upon assumptions and starting from a given fact or measurement.
However during the course of just one year the market changes, new products are introduced by the company and the competition. Hence the assumptions or starting point are no longer reflecting the reality of the market and the level of competition.
Sales bonus systems are locked-up systems that reward sales efforts in a changing market.
Commission systems will always fail as the market is constantly changing.
As sales people are driven by their commissions much effort is wasted to achieve the wrong goals.
As the salesmen of the bigger or leading companies have the wrong focus or goal, it creates opportunities for the competitors or smaller companies to step in or start-ups to have a window of opportunity. the larger the company the slower it will react to the ever changing market.
What if there would be a bonus system for R&D or development dept.?
– A bonus system for delivering products on time
– A bonus plan for delivering products with a minimal number of bugs
Or should salesmen have no commissions a constantly changing commission plan is not manageable?
What if there would be a bonus system for R&D or development dept.?
–> Indeed, that’s what I’ve been thinking for ages. A lot of the sales people I’ve met are very motivated, hard working individuals: because they know that the more they work, the more they’re likely to earn.
As a matter of fact, I’m often jealous: as a developer, I’d like my work, my accomplishments to be more directly linked to my salary, to transcend the money-for-time exchange… unfortunately since development is usually a group activity, it’s a lot harder to gauge a single developer’s accomplishments compared to that of a salesman, who is directly responisble for bringing in customers and money.
Development efforts are also hard to measure: why otherwise would so money projects go far beyond their deadlines ?
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