Especially if you're doing account manager-type high-touch sales, which I assume Oxide is given its product, it would be difficult to hire strong sales people at all without variable compensation. It's best to think of sales as an entirely different kind of animal as the rest of the company. Like the post says, when they're making lots of money, everybody else is making even more money.
One thing people who have never managed direct sales teams might not immediately grok is: good sales people are experts at gaming incentive schemes. Their work and output adapts to their comp schemes in ways nobody else's does. If you cap a salesperson's comp in a quarter, they will work to move sales out of that quarter; exactly what you don't want.
> Like the post says, when they're making lots of money, everybody else is making even more money.
I’ve worked with sales people whose compensation had loopholes you could drive a truck through, make sales that cost us more money than we made on the contract. Now a few of those are good for attracting VC money, but you have to be strategic and I’ve seen too much evidence of them not being so.
If you lock up your biggest potential customers with bad contracts that makes you default dead and no good way to weasel out.
> One thing people who have never managed direct sales teams might not immediately grok is: good sales people are experts at gaming incentive schemes.
Is that just circular though? i.e. I think everyone's like that, it's just unusual that it's tied directly to compensation. e.g. if I feel that my Jira output is being critically monitored, I might push something (or the reporting of something) into the next sprint if it's close and I've already done a lot in this one; I might more diligently create tickets for every little incidental thing that popped up (rather than just quietly getting it done).
I'm not comp'd according to that, but it's the same behaviour, it's just 'a measure becoming a target' really isn't it?
As others have said, the sales compensation model is fundamentally a low base and then a percentage of the sale. I think Ben Horowitz had an early blog post about not trying to innovate on sales compensation models, and having seen a few attempts at "innovation" at Google Cloud, I agree. It's almost never worth the complexity.
You can figure out various sliding scales, maybe even caps (but adjusting the scale is more rational), but I think flat pay is basically anathema to being a salesperson.
I forget the details, but the rough shape of it is that sales makes a lower base salary, but with a commission component that can lead to a higher salary than the standard one. I can't remember if there's also some sort of cap.
You could take it as undermining those other points, but I don't. (I am, of course, biased.) We didn't do this because we needed to address some failing of these other things, we did it because sales has an incredibly strong culture of this compensation model, to the degree that it would be difficult to hire otherwise. That isn't an issue with other staff.
Additionally, some of the points don't work the same way with sales, that is, the variability is easily measured and objective. Sales people don't write promo packets, you count up the amount they sold.
> we did it because sales has an incredibly strong culture of this compensation model, to the degree that it would be difficult to hire otherwise. That isn't an issue with other staff.
SF Bay Area SWEs are famously compensation-focused, and this uniform salary is basically Google new-grad SWE entry-level TC.
Are you hiring from the minority of good engineers who aren't driven primarily by compensation, but you just can't find the analog of that among good salespeople?
> Sales people don't write promo packets, you count up the amount they sold.
And you manage the imperfect alignment? (Imperfect, like the incentive to close a sale by lying to a customer, in a way that won't be discovered until next year. Or incentive to close a sale now, and don't communicate back a customer insight that would nudge the product line in a better direction longer-term, since that insight risks someone at the company wanting to talk to the customer, which puts the imminent commission at risk.)
Happy to go into it in more detail, but the salient points are in the piece: sales folks are eligible to make more -- but can also make less. This is in keeping with the way enterprise sales is done more or less everywhere: sales is different from every other company activity in that it is very quantifiable. I don't think that there's a whole lot more to say about it?
"this is in keeping with the way enterprise sales is done more or less everywhere..."
For non-sales roles you're doing things very differently than (most) everywhere else, which is why it seems like a compromise to give in to an 'industry standard' model for enterprise sales.
The fact that sales is quantifiable doesn't explain why sales people get instantly rewarded with cash comp (+ equity) while everyone else on the team might wait years for a potential liquidity event.
The real explanation for why sales people get paid so well is that some really good sales people sold the idea of a highly favorable 'industry standard' model for enterprise sales.
Sometimes salespeople boost their metrics by promising features that come from other people's work. But they also sometimes provide valuable information on what people are willing to pay for (very different from what they say the want).
Honestly it makes sense and resembles how other companies pay sales people. Lower base salary than other roles in the company for similar years of experience (roughly) but with a commission component that's some percentage of each sale. Commission is a big big part of sales culture that I suspect is hard to eliminate in an effort to be different.
What's interesting is that often times the commission has no cap, so top sales people can take home higher income than even than executives (at least in cash compensation).
But to the commenter's point, true transparency would share the commission % as well :)
tptacek|10 months ago
One thing people who have never managed direct sales teams might not immediately grok is: good sales people are experts at gaming incentive schemes. Their work and output adapts to their comp schemes in ways nobody else's does. If you cap a salesperson's comp in a quarter, they will work to move sales out of that quarter; exactly what you don't want.
hinkley|10 months ago
I’ve worked with sales people whose compensation had loopholes you could drive a truck through, make sales that cost us more money than we made on the contract. Now a few of those are good for attracting VC money, but you have to be strategic and I’ve seen too much evidence of them not being so.
If you lock up your biggest potential customers with bad contracts that makes you default dead and no good way to weasel out.
OJFord|10 months ago
Is that just circular though? i.e. I think everyone's like that, it's just unusual that it's tied directly to compensation. e.g. if I feel that my Jira output is being critically monitored, I might push something (or the reporting of something) into the next sprint if it's close and I've already done a lot in this one; I might more diligently create tickets for every little incidental thing that popped up (rather than just quietly getting it done).
I'm not comp'd according to that, but it's the same behaviour, it's just 'a measure becoming a target' really isn't it?
boulos|10 months ago
You can figure out various sliding scales, maybe even caps (but adjusting the scale is more rational), but I think flat pay is basically anathema to being a salesperson.
Edit: found it, though it isn't from as long ago as I remembered. https://a16z.com/why-must-you-pay-sales-people-commissions/
steveklabnik|10 months ago
You could take it as undermining those other points, but I don't. (I am, of course, biased.) We didn't do this because we needed to address some failing of these other things, we did it because sales has an incredibly strong culture of this compensation model, to the degree that it would be difficult to hire otherwise. That isn't an issue with other staff.
Additionally, some of the points don't work the same way with sales, that is, the variability is easily measured and objective. Sales people don't write promo packets, you count up the amount they sold.
neilv|10 months ago
SF Bay Area SWEs are famously compensation-focused, and this uniform salary is basically Google new-grad SWE entry-level TC.
Are you hiring from the minority of good engineers who aren't driven primarily by compensation, but you just can't find the analog of that among good salespeople?
> Sales people don't write promo packets, you count up the amount they sold.
And you manage the imperfect alignment? (Imperfect, like the incentive to close a sale by lying to a customer, in a way that won't be discovered until next year. Or incentive to close a sale now, and don't communicate back a customer insight that would nudge the product line in a better direction longer-term, since that insight risks someone at the company wanting to talk to the customer, which puts the imminent commission at risk.)
halestock|10 months ago
bcantrill|10 months ago
theoryofx|10 months ago
For non-sales roles you're doing things very differently than (most) everywhere else, which is why it seems like a compromise to give in to an 'industry standard' model for enterprise sales.
The fact that sales is quantifiable doesn't explain why sales people get instantly rewarded with cash comp (+ equity) while everyone else on the team might wait years for a potential liquidity event.
The real explanation for why sales people get paid so well is that some really good sales people sold the idea of a highly favorable 'industry standard' model for enterprise sales.
Arnt|10 months ago
Sometimes salespeople boost their metrics by promising features that come from other people's work. But they also sometimes provide valuable information on what people are willing to pay for (very different from what they say the want).
zem|10 months ago
skadamat|10 months ago
What's interesting is that often times the commission has no cap, so top sales people can take home higher income than even than executives (at least in cash compensation).
But to the commenter's point, true transparency would share the commission % as well :)