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Comment by neilv | Hacker News Reader

Why do sales positions tend to have performance-based compensation when many other roles in the same company are flat salary?

Is it simply because the metrics are so obvious (i.e., attribute sales to the salesperson's individual performance), that it's easy compared to other roles?

Is it because sales work is so close to revenue numbers, that more thought has been given to compensation, or it's thought of differently (like CEO comp)?

Is it a belief that the personalities of salespeople in particular are motivated to perform better by the incentive alignment?

Is it because performance-based can be a sweeter deal for high performers, which some historical salespeople managed to secure, and they're not giving it up? (Should SWEs be maneuvering to get "points" on the particular products they worked on, rather than it just being something they can mention when they beg for a promotion?)

Something else?

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A little bit of column a, a little bit of column b.

There are industries where sales reps are paid only on commission. The advantage to the company is simple: you don't pay anything to sales reps who don't sell anything. That's where the commission system came from. So, some of this is historical, and, yes the metrics are really obvious. At least the core revenue metric is. But, that's a lagging indicator of performance -- there are endless debates about the leading indicators of sales performance, and none of those are nearly so clear.

Second, most people aren't any good at sales and aren't ever going to be good at sales. The performance distribution is as close to a Pareto distribution as I've ever seen. The sales reps you want -- the ones that bring in 80% of the revenue -- certainly are motivated by "incentive alignment." Actually, they're motivated by being paid enormous sums of money, and they know that if you won't pay them, the competition will.

Third, the sales reps have more leverage than many back-office workers in that their work is very fungible. Or, at least, sales rep believe and act as if they have a lot of leverage. They don't go to school for years or develop deep domain expertise that might not translate to a competitor. They'll happily take their skills elsewhere if they feel there is a better opportunity secure in the knowledge that if you can sell widget a, then you can also sell widget b.

I also think this is weird. These sorts of compensation schemes incentivise short-term revenue at the expense of making the sales that are good for the organisation long term. They encourage an "always be closing" mindset that leads to signing customers that take the organisation on a bad trajectory.

But when I asked an actually really good[1] salesperson about this, they said that it's simply that you can't hire good salespeople on flat compensation because the good ones don't want to subsidise the pay of the less good ones.

So essentially you have to choose between variable comp, which increases the likelihood of short-term focused sales, or fixed comp, which takes to near zero the likelihood of long-term focused sales. Both are bad!

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[1]: By "good" in this case I don't mean "closes a lot of revenue" but "picks customers that are good for the future of the organisation" (and also happens to close a lot of revenue but that's secondary.)

Maybe the more obvious metrics for sales enable the top performers to demonstrate that they are top performers, and therefore demand the high compensation?

A similarly-minded SWE, on the other hand, doesn't have the metrics. Either they're at a FAANG and trying to hit their less-obvious metrics for promotions, or they're instead just packing fresh keywords on their resume, and preparing to refresh Leetcode and job-hop every 18 months, to increase their compensation that way.

(I still don't want to do metrics for engineering; I want engineering thinking and working holistically, as a team -- for the interests of the company, even though leadership won't understand most of the subtle differences of what a great engineering team does for the company. The current SWE careerism grinding mis-alignments will have to end, though, once people acknowledge that we really need SWE not to be, as XKCD said, "our entire field is bad at what we do, and if you rely on us, everyone will die".)

All of the above. To answer the second question - if salespeople aren’t selling, there’s no money to pay salaries. Commission plans are an important factor in cost of revenue.

And yes, certain personalities are 100% attracted to sales because of the high earnings potential and the direct correlation between performance and compensation.

Salespeople don't want to join an org without performance-based compensation. We can ask why, but that brute fact is enough to explain why sales positions tend to have performance-based compensation.

Lots of answers already but the short answer is that sales sucks and people don’t do it without direct and immediate incentives.

So if you want sales you create those incentives.

Class consciousness. Sales guys are in the same caste as the professional managerial class so they get a better deal.

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