Few suggestions inflame passions faster than the suggestion that performance pay be abolished.
It’s our contention, nonetheless, that, in an ideal environment, commissions and bonuses are likely to be in conflict with the goal of the organisation.
Of course, traditional sales processes are not ’ideal environments’ and, as such, the traditional sales process serves as an illustration of the conditions under which performance pay is, in fact, appropriate!
Let’s begin, accordingly, with the case forperformance pay.
The case for performance pay
Let’s envisage a situation where performance pay definitely makes sense.
The situation that springsto mind immediately is outsourcing — or more generally — the use of contractors.
If you have outsourced a task to a contractor, it makes sense to compensate that contractor on a per-piece (or results) basis.
Because you are outsourcing, you have no control over the contractor’s production process (you can consider only inputsand outputs) and, as a consequence, it doesn’t make sense for you to gamble on something over which you have no control.
Most organisations understand this explicitly. This is why most contractors (including service providers) are under pressure to quote on a fixed-price — rather than a time-and-materials — basis.
Now, if you consider the structure of a typical sales process (as discussed in the preceding article), you’ll realise that the relationship between the salesperson and the organisation is more similar to a contractor-clientthan it is to an employer-employee relationship:
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Salespeople are responsible for the end-to-end sales process. |
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Management has limited (if any) access to objective process data. |
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Salespeople perceive that they own customer relationships (and in many cases they do!) |
In this environment, it certainly does make sense to pay salespeople as you would a contractor.
But, as you well know, we maintain that this isnot an ideal environment.
What we now have to consider is how the radically different environment we advocate impacts on the case for performance pay.
The ideal environment
In summary, the essential differences between a typical
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Here at Ballistix, our speciality is what we call sales process engineering. We work predominantly
with organisations that sell services and 'major' products. We assist these organisations
with sales process design and management, technology, and communications.
