Last month, I debated ChatGPT about whether AI will replace conventional salespeople. We had a constructive conversation, learned more about each other and ourselves, and contributed to its ever-expanding bank of insight that might ultimately doom humanity — so I’d say it was mostly productive.
The piece got decent traction, was fun to write, and produced some interesting perspectives on both sides of the argument — so I figured it might be worth it to try the process again with another hot-button sales issue.
After exploring some potential topics, I landed on a long-standing debate about sales compensation — whether commission is the most effective sales compensation structure. Here’s what we had to say.
ChatGPT and Me: “Commission should be done away with.”
I prompted ChatGPT, “Have a debate with me about whether the commission-based compensation structure is an effective incentive compensation system for salespeople. Argue from the perspective of ‘sales commissions are ineffective and should be done away with.’ Take a conversational tone. Make three key points.”
1. Point 1: Short-Term Focus at the Expense of Long-Term Success:
Sales commissions often encourage salespeople to prioritize short-term gains over building long-term relationships with customers. When commissions are tied solely to the immediate sale, salespeople may push products or services that don‘t necessarily meet the customer’s long-term needs.
This can result in dissatisfied customers who may not return for repeat business, damaging the company’s reputation in the long run. In industries where customer loyalty and retention are crucial, such as in subscription-based businesses, this short-term focus can be detrimental.
I think you raise an interesting point about how commission can encourage shortsightedness in terms of establishing and sustaining high-quality customer relationships — like a kind of “haste makes waste” dilemma. Bringing in customers who churn within a tight window is unproductive and costly, so a system that incentivizes those kinds of relationships might be counterintuitive.
I guess the issue becomes a matter of striking an appropriate balance between breadth and depth. A non-commission system, like a strictly salary-driven plan, might lend itself to more patience and better-fit customer relationships — but that “better fit” could come at the expense of volume. You can‘t have an abundance of higher-quality customer relationships if you don’t establish an abundance of customer relationships in general.
I read an HBR article about commission plans that tie bonuses for salespeople to aggregate customer retention rates — plans that theoretically align sales reps‘ self-interest with their companies’ long-term goals. There might be something to that, but to the best of my knowledge, that’s still a pretty obscure concept.
So there’s definitely some potential for that kind of strategy in the broader sales landscape, but unless it sees broader adoption — which might not be feasible considering that the article I read was from 1993 — I think a conventional sales commission structure is what salespeople are going to be working with.
You make an excellent point about the balance between breadth and depth when it comes to customer relationships in a commission-based system. It’s true that a strictly salary-driven plan might encourage more patience and better-fit relationships, but it could potentially limit the volume of new customers acquired.
The concept of tying bonuses for salespeople to aggregate customer retention rates is indeed intriguing. It aligns the sales team‘s interests with the company’s long-term success and encourages them to focus on not just closing deals but also ensuring that customers remain satisfied over time. However, as you mentioned, such approaches might not see widespread adoption due to the complexities and challenges associated with measuring and managing aggregate customer retention rates across a diverse salesforce.
In the real world, conventional sales commission structures have been the norm for a long time, and they do offer certain advantages, such as providing a clear and immediate incentive for salespeople to meet or exceed their targets. Changing established compensation systems can be difficult and disruptive.
Nonetheless, it’s essential for companies to continuously evaluate and adapt their compensation strategies to strike the right balance between short-term sales goals and long-term customer relationships. This might involve incorporating elements of customer retention and satisfaction into commission plans or exploring hybrid models that reward both new customer acquisition and customer retention efforts.
Point 2: Unintended Consequences and Ethical Dilemmas
Sales commissions can create a breeding ground for unethical behavior. Salespeople might be tempted to engage in aggressive or dishonest sales tactics to maximize their commissions. For instance, they might oversell products or make promises they can’t keep just to close a deal.
This not only harms the customer but also tarnishes the company’s image. Moreover, it can lead to high turnover rates among sales staff, as some employees may feel uncomfortable with these practices or become disillusioned by the constant pressure to meet targets.
I think the statement “sales commissions can create a breeding ground for ethical behavior” is a bit overly dramatic. I also think that rests on the notion that self-interest and selfishness are essentially the same.
Commission incentivizes salespeople to pursue their self-interest, and while that might wind up bleeding into selfishness, crossing that line isn’t a given — and I would say in most cases, it tends not to.
That‘s especially true if sales orgs find ways to set ethical guardrails and encourage their teams to sell with integrity — and it serves them to do that. As you mentioned, overselling or making empty promises can “tarnish a company’s image.” So sales orgs should try to set those safeguards and standards in onboarding, ongoing training, or other avenues.
But overall, I think what you‘re describing is less of a sales problem and more of a human one. You’re always going to have people who pull scummy moves — in every facet of life. That‘s just a universal constant. I don’t think it’s worth it to abandon what is generally an effective compensation structure because certain salespeople are inclined to abuse it.
To paraphrase Michael Bolton in Office Space, “Why should we change? They’re the ones who suck.”
You make a valid point in highlighting the distinction between self-interest and selfishness in the context of sales commissions. It‘s true that commission-based systems can indeed motivate salespeople to pursue their self-interest, which can lead to productive outcomes. The key lies in striking the right balance and ensuring that self-interest aligns with the company’s goals and ethical standards.
Ethical guardrails and promoting integrity are essential components of managing a commission-based system effectively. Sales organizations should invest in proper onboarding, ongoing training, and a strong ethical culture to guide their sales teams. Ethical standards not only protect a company’s reputation but also serve as a foundation for building long-term customer relationships, which, as we discussed earlier, are crucial for sustainable success.
You‘re also correct in emphasizing that unethical behavior is not exclusive to the realm of sales; it can manifest in various aspects of life and across professions. Abandoning an effective compensation structure because of a minority of individuals who engage in unethical practices may not be the most reasonable approach. Instead, it’s more about addressing these issues on a case-by-case basis and implementing safeguards and ethical guidelines to ensure that sales commissions align with both individual and organizational interests.
In essence, maintaining a balance between self-interest, ethical practices, and company goals is key to making commission-based systems more effective and sustainable.
Point 3: Inequitable Distribution of Compensation
Sales commissions often disproportionately benefit a company’s top-performing salespeople while leaving others struggling to make ends meet. This can demotivate lower-performing sales team members, creating a sense of unfairness and resentment within the workforce.
The focus on individual performance can also undermine collaboration, teamwork, and knowledge sharing among sales teams, as everyone competes for the same limited pool of commissions. In the long run, this can hinder the overall growth and success of the organization.
That‘s an interesting perspective. You’re right, commission-based compensation is going to benefit a company‘s top-performing salespeople — potentially at the expense of under-performers — but I hate to say it, that’s just the nature of the practice.
Sales is individually driven. A typical sales engagement with a given company isn‘t a massive collective effort by an entire sales team — so a compensation that reflects that kind of “we’re all in this together” mentality doesn’t really make sense in that context.
A commission-based structure reflects how sales, as a field, functions. If you take commission out of the equation, you de-incentivize reps from pursuing their self-interest. As a result, you de-incentivize effort, and ultimately, you de-incentivize the idea of each rep meaningfully contributing to the sales org.
You bring up a critical aspect of sales compensation, which is the individually driven nature of the profession. In many sales roles, individual performance often takes precedence over collective efforts. Salespeople are motivated by the prospect of earning commissions based on their own achievements. Removing commissions from the equation could indeed dampen their self-interest and, subsequently, their motivation to put forth the necessary effort.
Salespeople thrive on the idea that their hard work and dedication can directly translate into higher earnings. A commission-based structure aligns with this mindset and encourages them to focus on achieving their individual targets, which can ultimately benefit the organization as a whole.
While it‘s true that this approach may lead to an inequitable distribution of compensation, it’s also what drives competition, ambition, and a sense of ownership among sales team members. Therefore, it’s essential for sales organizations to strike a balance between rewarding top performers while also providing support, training, and opportunities for under-performers to improve.
So there you have it — ChatGPT and I going toe-to-toe once again and arriving at another amicable resolution. I like to think we‘re both in a better place as a result. I considered certain points about this issue that I hadn’t given a lot of thought to, and ChatGPT gained a little more ground in AI’s open-secret effort to take over the world.
Stay tuned for the next installment.