Sales Commission? Outmoded. We’ve taken the decision. It’s gone.
Let’s be clear. I am proud of my career in software sales leadership. I am also proud that as a team we (Thoughtworks Studios Sales) focus on trying to do the right thing for our customers. But over recent years I have become increasingly aware of two things:
Doing the right thing for the customer is achieved in spite of the way* salespeople are paid, not because of it.
*At the core of that way is the reliance on a Commission Plan, a reward scheme where a chunk of a salesperson’s salary is paid on the achievement of revenue and other related targets.
It needs to be challenged. And so we have. We looked into it together and we realized that the Commission Plan could reduce alignment with our customers. So we’ve done away with it. As a customer you can now be confident that the advice you receive from your sales team is motivated not by a commission check but by a real desire to add value to your business.
As far as I know, we are the only established B2B software company to get rid of the Commission Plan, which up to now has been a given in the industry.
Boils down to the two reasons that matter - our customers and our values.
Customers no longer need a salesperson to let them in on the secrets of opaque pricing structures. They want a salesperson who understands their market, constraints, and business model. Someone who will add value to their thinking and help them align more closely to their business priorities. Perhaps even challenge their thinking. This is better achieved if the salesperson is incentivized by simply doing the right thing for a customer without worrying about how it will affect their salary.
Thoughtworks Studios motivations are clear - championing software excellence and empowering software teams that aspire to be great. Everything we do supports those goals and so customers can relax, knowing there is no hidden agenda or doublespeak. The openness and transparency in our products must feed into pricing and commercial transparency. Yes we need revenue, it’s the oxygen that drives investment in further innovative products and capabilities we can offer to the world, but the revenue is a by-product of us helping delivery teams to become great, not the prime motivator. That’s an important distinction. We want to motivate our salespeople to hone their skills and energy into gaining insight and understanding, focussing on what brings value to our customer.
One by one B2B and enterprise software companies will reduce and replace their commission schemes with more transparent salary schemes, leaving highly-leveraged commission schemes to the large application providers (Oracle, SAP etc). And over time that too will diminish. Why? Software companies will gradually move away from being “sales-led”. Sales-led software companies are pushing on a rope in today’s market. Revenue is important, but today’s software companies need to look at the best value ways to provide service to their customers. And frequently the high-cost sales team in the corner is not the answer. Particularly if that team starts to dictate product and company direction. Following the path to maximum short-term dollars is not necessarily the best path for a software company. So if companies are moving away from being sales-led – what will they become? Studios is clearly product-led, and that has a massive effect on the company values, directions and priorities. Our customers - knowledgeable, focussed and aspirational - want their suppliers to deliver long-term value and help them to achieve their goals.
Agile delivery practices have removed business silos - thus increasing trust levels and creating poly-skilled, highly collaborative, self-organized teams focused on value. In the same way, the removal of sales commissions is an important step forward for the software industry, creating salespeople that are better aligned and therefore better partners.
Do you care if your software partner’s sales team are paid commissions?
Disclaimer: The statements and opinions expressed in this article are those of the author(s) and do not necessarily reflect the positions of Thoughtworks.