One company has taken the unusual step of putting every employee in the company on commission. Sales suddenly had a lot more friends and collaborators.
Traditional commission-heavy compensation for salespeople does a great job of stoking the competitive flames and egging on sales pros to meet or exceed their targets (too good a job, according to some), but it also makes sales a relatively lonely job.
Sure, your manager has a vested interest in helping you out and your coworkers probably aren’t monsters – they’ll lend a hand when they can – but as the month winds to a close, it’s easy for a sales person to feel like sales is an individual rather than a team sport.
But not at Fishbowl. The 100-employee strong, Utah-based software company has a very unusual approach to commissions – every single employee gets one. The effect, CEO David Williams told Yesware, is that sales becomes a team sport that the whole company plays together.
“For salesmen, knowing that the entire company is rooting for them is pretty powerful. You don’t just have this isolated sales team that’s trying to hit their numbers. They have a hundred people supporting them in revenue creation,” he says.
How Does It Work?
Together with president Mary Michelle Scott, Williams recently wrote a post for HBR Blog Network explaining all the details, but the basic gist isn’t hard to grasp. Every employee gets a base salary and then, depending on their department, a certain percentage of their compensation comes in the form of a monthly commission based on revenue. Ratios of salary to commission range from 10 percent salary and 90 percent commission for salespeople to 80 percent salary and 20 percent commission for engineers.
Taken together over a period of months or years, compensation is generally higher than market, but it’s lumpy. “We have a track record that shows over time our model yields overall higher compensation,” says Williams, but he concedes that, “we have months that are very, very lean and months that are fat.”
How did this unusual compensation structure come about? “It originated out of necessity,” explains Williams. Back in 2004 he was on the board of a company that was the majority shareholder in the firm that would become Fishbowl, which at that time had failed to produce a product or any revenue despite several million in investment. Williams was sent to shut the company down.
He had a look at the team and asked the board to give him a month to try and turn things around. There was no money for salaries so everyone ended up working on commission. Over 10 years this evolved into today’s hybrid salary-commission system. “I just love it. I would not change it,” Williams says, explaining that, “bonuses are up to the whims of those in charge” while his compensation model allows “everybody to see very transparently how we’re doing.”
The cultural effects are also huge, he claims. “What it’s done is close the gaps between departments, so you don’t have a bunch of developers building something that they think they should build and then throwing it over the fence for testers to test and that hopefully your salesmen like to sell,” he says. Everyone is focused on revenue creation from the get-go.
“I’ve helped many companies around this area move into this compensation model, so I’ve seen it work in all sorts of industries,” says Williams, but that doesn’t mean the idea is for everybody. There are some preconditions for successful implementation, including a culture of fairly radical openness. You can’t monkey with the numbers and expect this system to work. “You need to be completely open with your revenue. Most companies are but sometimes you tuck things here and there and revenue is not necessarily that which you see,” he says. Not at Fishbowl, which pays commissions on gross revenue with no massaging of the numbers.
Why It’s Particularly Good for Salespeople
If you have the sort of leadership that can stomach that level of openness and also accept that some potential hires may have reservations about the compensation scheme, commissions-for-all can have particularly beneficial effects for the sales team, Williams feels.
“We all get on the same boat every month. You get programmers coming over towards the end of the month asking if there’s anything they could do to help any of the [sales team’s] customers with workarounds or anything particularly they could build that would take an hour or two,” he says.
That sort of responsiveness and understanding is bound to attract sales pros to the idea, but putting everyone on commission not only makes people more likely to help out sales, it also eases the stress of making your numbers by spreading it around, much the way locker room camaraderie can ease an athlete’s performance anxiety.
“Every day we send out our month to date that shows the revenue and what department the revenue came from, and the last two days of the month we show it every hour. It’s really fun. It turns something that’s stressful at the end of the month—making your numbers—into something exciting,” Williams says.