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Comment by ddebernardy | Hacker News Reader

> sales is a case where it's trivial to measure results and align incentives

It's anything but. Good sales usually are driven by how much they make, and if there's any misalignment between your commission plan and what's good for the company they'll optimize their own revenue in a heart beat. It can be very hard to align your commission plan with what the company actually needs if the business you're into is non-trivial. (Think optimizing the use of existing work capacity, selling high profit products rather than easier to sell low profits ones, keeping sales more or less aligned with the company's capacity to hire staff that can deliver, etc. Selling too much too fast is not always a good thing.)

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Yeah, but compare that to literally any other job and it's unbelievably remarkable that it's even remotely possible to pay sales people in proportion to the value of their results.

And that's the reason that all of those other people aren't in sales!

You can just read the near-infinite stream of blog posts from engineers who figured out how to peg their compensation to the value they generate and instantly went from being drones to consultants or executives.

If everyone had adequate sales skills, corporations wouldn't have any margins. Profits are literally the realization of market inefficiency.

The number #1, #2 and #3 things you can do to improve your compensation are:

    #1> Figure out how much value you create
    #2> Figure out how much value you create compared to your peers
    #3> Ask for your fair share of the value that you create or find someone who will pay you that
    Bonus> If your fair share is less than your compensation, congratulations but start looking...or maybe you're good at selling!

> It can be very hard to align your commission plan with what the company actually needs if the business you're into is non-trivial.

But...it usually is trivial. Businesses sell widgets: a ream of paper, a car, a CRM.

Is there anyone whose instrinsic goals are more aligned with the company's than a commissioned salesman? (Alignment with the customer's goals...that's a whole other story.)

Haha. Anything but. If you have one product, sure it's easy. But if you have a diverse product offering things quickly spin out of control.

I see this a lot in my current company.

Low margin hard to maintain product being pushed over high margin easy to maintain because the pricing (and margin) calculations don't take into account the tech support burden.

Having proper understanding of this the cost to support different product lines is difficult for large companies and the comp structure is usually just straight up gross revenue. For those higher up margin begins to play a factor, but they usually doesn't account for where the "overhead" gets spent.

I can, with almost 100% confidence, assure you that upper management understands this. There is some value that those high-dollar, low-margin transactions provide that isn't realized on the company balance sheet. It could be that your company's board or investors are asleep at the wheel, or haven't looked too closely at the books, or there aren't adequate company controls.

They could be positioning for some sort of exit, or are just trying to juggle the company afloat until they solve what seems to be an unsolvable problem.

If what your saying is really true though, that would be enough to motivate me to look for another job.

It would be much worse if they were just clueless about this.

If the pricing and compensation structures for products are misaligned with true costs, that is indeed a problem.

A concrete example: a company might offer two ways of doing things:

- an "old way", which is more expensive, but more easily understood by sales and gives them more commission because it's base price is more expensive

- a "new way", which while cheaper and better from a "meta" business standpoint, doesn't bring in as much for an established sales person, because the overall sale would be smaller, and on top of that, they have to make the effort to understand how to sell the new way.

I've seen several higher-quality products get choked out because of this pattern happening, and sales being accidentally-incentivized to keep people in the old, pricier way of doing things.

> more expensive

Lower margin products carry lower commissions. (Or should, at least.)

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