5.6. Death of a Sales Culture

“There is a different model that aligns short-term business goals without neglecting long-term

customer relationships. It’s based on vested commissions.

Rather than focusing on rewarding salespeople immediately after a transaction, vest the commission over time so your sales team is incentivized to not only bring in new customers, but also work with existing customers to ensure they’re happy and stay happy. Build a culture based on relationships rather than transactions.

Here’s how to set it up at your company:

1. If you’re starting a new sales organization, do not offer traditional monthly cash commissions. It’s best to have everyone in your company compensated in the same way—so offer salespeople a competitive salary and sales performance bonuses of additional stock options that vest over time. Stock provides a built-in incentive to stick around and invest in long-term customers who are good for the business.

1. If you’re trying to transition to a relationship-driven culture, you may not be able to kill traditional commissions right away. In that case, any stock or cash (stock is still preferable) that you give as a commission should vest over time. Pay 10–15 percent of the commission at first, then another tranche in a few months, then another a few months after that, etc. If the customer leaves, the salesperson loses the remainder of their commission.

1. Every sale should be a team sale. So if you have a customer success team (the team that

actually delivers, sets up, and maintains whatever is sold to the customer), then it should sign off on every deal. Sales and customer success should be under one leader, in the same silo, being compensated in the same way. In this setup, sales can’t just throw a customer over the fence and never think about them again. If there’s no customer success team, then sales should work very closely with customer support, operations, or manufacturing—create a board of people to approve each commitment.

My dad was on commission but he would often sacrifice a sale in order to build a personal connection. The best salespeople are the ones who maintain relationships even if it means not making money that day.

Those are the salespeople you want on your team. Because if you do it right, they truly will become part of the team, rather than mercenaries who swoop in, make their money, then jump ship to the next hot company, leaving a trail of problems behind them.

The danger with traditional commission-based sales models is that they create two different cultures: a company culture and a sales culture. The employees in these two cultures are compensated differently, think differently, care about different things. Hopefully most people in your company will be focused on the mission—on achieving something great together, grinding away at a big, shared goal. Many salespeople won’t give two shits about your mission. They’ll be focused on how much they’re making month to month. They’ll want to close deals and get paid. It won’t matter what they’re selling as long as it sells.

The bigger your company, the further these two cultures will drift apart. Huge commissions, sales awards, and sales conferences where everyone high-tails it to an island, ready for a weekend of drinking, may feel great for your sales team in the moment. But they can drag morale down for the rest of the company. Why are we here working, building this thing, while they’re getting wasted in Hawaii, doing shots out of their Best Salesperson of the Year trophy?

But for all creative jobs we would pay one incredible employee at the top of her personal market, instead of using that same money to hire a dozen or more adequate performers. This would result in a lean workforce. We’d be relying on one tremendous person to do the work of many. But we’d pay tremendously.

This is the way we have hired the majority of employees at Netflix ever since. The approach has been remarkably successful. We have exponentially increased our speed of innovation and our output.

Last, when it comes to the key people who absolutely drive performance, great managers/coaches simply do whatever it takes to keep them on board, including offering a customized compensation package. If one person wants less base and more incentive-based pay, so be it. If another wants more time off, let it happen. “Fairness” does not mean “sameness.” You need to be creative and flexible in order to keep your top talent happy, from a compensation-package perspective.

Wages are one of your biggest expenses and should be used strategically to differentiate your firm from the competition.

I went to our board’s compensation committee and explained the dilemma. When you innovate, everything needs to change, not just the way you make or deliver a product. Many of the practices and structures within the company need to adapt, too, including, in this case, how the board rewards our executives. I proposed a radical idea— essentially, that I would determine compensation, based on how much they contributed to this new strategy, even though, without easily measured financial results, this was going to be far more subjective than our typical compensation practices.