Are sales people only motivated by commissions?

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Today in Our Organizational Behaviour class we had a case study about SAS. SAS is a software company with a very unique culture that has been successful and profitable for more than 30 years. I won’t bore you with the full description of the company and how its special practices differentiate it from many other companies and allows it to be included in the “100 companies people most want to work for” list for many years in a row.

I am more interested in my classmates work. As part of the presentation, the three teams that presented their findings today in class had to present recommendations on how to company should face it future challenges and what changes should be made to the company’s strategies and culture.

In SAS, there is a unique approach to sales commissions. General sales targets are defined, but there is no commission to sales people based on the number of sales they make. As the case study describes it:

“Account representatives are not paid on the basis of sales commissions. Goodnight [SAS owner and CEO – E.S.], in explaining this practice, noted that ‘sales commissions do not encourage an orientation toward taking care of the customer and building long-term relationships.’ Also, he believes a commission culture is too high pressure. He stated that they have had sales people come over from Oracle because they were tired of the high stress, high pressure, Oracle culture”.

It is important to note that the absence of commissions does not seem to hurt sales. SAS constantly surpasses all its competitors in terms of sales and more than that, has a 98% of renewal of contracts.  As the quote above suggests, the lack of commissions also seems to fit with the general culture of the organization and seems to work.

This is the reason I was truly surprised to discover that all 3 teams recommended changing the pay system for the sales representatives and adding a commission based system. My simple question is WHY? It seems to work. More important than that, this is what makes SAS unique. You know how I feel about the importance of being remarkable.

You can argue about the question whether the commissions approach is the right approach generally (or maybe argue about using a joint approach), but it seems to work for SAS. So why change it?

You might say that people think that if they are motivated by money than other people are the same. But we know they are not. People are different.

Another explanation.  I read somewhere (and I can’t find the link) that people report that they are not motivated by money but by more “noble” cause, but always assume that other people are only motivated by money.

I was thinking about it a lot. I don’t know why. I think this is another example of a conventional wisdom that people have a very hard time to abandon. Conventional wisdom that only money rewards motivates people. Is it a true? Some argue it isn’t. The SAS example sure shows us that this conventional wisdom might be wrong in certain cases.

I don’t know which explanation is correct. I only know that the three teams that presented today in class all had a bias towards commission based approach. And in that, I think, there is some lesson for all of us. Think you can tell what it is?

Elad

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