Let’s Put Marketing On Commission!

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My friend, Dan McDade, President ofPointClear, has been leading an interesting discussion at Focus. He asked me the question, “would sales people be willing to share commissions with marketing if marketing was perceived to have done a better job for sales?” (it’s a good discussion, I recommend reading it.)

My immediate reaction was, “Isn’t marketing’s job to be supporting sales? Why do we need to pay them some of sales’ commissions if they do their job well?” I still maintain that position, but Dan’s question started me thinking. What would happen if we put marketing on a commission plan, what if we made them more accountable for the results they produced?

What if we came up with metrics that were closely aligned with sales–perhaps shared with sales and put every marketing person on commission? Would that drive greater cooperation? Would it elinate the silo’s? Market and sales are both accountable for generating revenue and growing the company. Aligning everyone in marketing and sales around similar goals and objectives could only be good.

What metrics would we put in place? Clearly some level of revenue metric. Probably we’d look at some sort of lead quality metric. What about the nurturing programs that marketing conducts? How would we measure those? What about the other marketing deliverables used to support sales—clearly we don’t want to incent people on quantity, but we do want to look at some sort of metric around good quality collateral that really helps sales and is meaningful to customers.

Another thing we might do is align marketing and sales teams together–for example the marketing people supporting the financial sectors, with the sales people selling in those sectors. Likewise in manufacturing, health and so forth. Perhaps we can put these team on some sort of shared goals. Many sales people have shared goals with other sales people, so we can design a system that would bring marketing into the team. It might be very powerful.

I’m certain that we can design some metrics–some individual, some team oriented that can get sales people and marketing people to work more collaboratively. I think this should be done.

Now what about commission? I’m all for paying marketing people commission. Frankly, I would put everyone in an organization around some sort of “commission” or incentive program. But, there’s no reason to take that commission away from sales people. It’s easy to design a commission program for marketing. We use the same principles we do for sales people.

First, the commission program must be cost neutral to current spending–at plan. That is, what I’m spending for marketing people today, would be the same I would spend for them under a commission plan–at plan. (That’s the way we design compensation program for sales people, let’s do the same with marketing.). Presumably, we would take the current “budget” for marketing people and reallocate it, some level of fixed base pay and some level of variable–commission based pay. If marketing achieved their goals, they would earn the full amount–base plus the commission. If they failed to achieve their goals, they would receive base plus whatever commission they earned. If they overachieved, they would earn more—perhaps with accelerators. All of this is just like sales, except it would be funded out of the marketing budget, not sales.

Now some of you might have pulled out your calculators and may be scratching your heads. “But Dave, what you are saying is we have to take a salary cut. This is just unacceptable, why should we do this? We want the upside of commission, why don’t you just put that on top of our current salaries?”

Without going into a long story about commission planning, let me just say, the job of marketing is not changing. Marketing has always been accountable to work with sales in supporting revenue generation and growth. So we aren’t changing the job – all we are doing is clarifying the goals and putting earnings at risk. If we aren’t changing the job, the value of that job to the corporation doesn’t change–stated differently, the budget for salaries, bonuses, etc. has to remain constant. What can change is how we allocate that funding–we can allocate some to a base salary and some to commission, bonuses, whatever we think will incent people to overachieve.

Commissions can be very powerful in driving behaviors (good or bad). In the sales world we are very comfortable with that, we know our total compensation is based on a base (if any) and all the variable (commission) payments we earn. We know we have some portion of our expected earnings at risk. It’s a very powerful motivator.

I think commissions for marketing are fantastic! I think virtually every marketing person should be on commission, with some portion of their earnings at risk, just like sales. It can be very powerful in accelerating the alignment of marketing and sales in driving revenue growth?

What do you think?

Republished with author's permission from original post.

Dave Brock
Dave has spent his career developing high performance organizations. He worked in sales, marketing, and executive management capacities with IBM, Tektronix and Keithley Instruments. His consulting clients include companies in the semiconductor, aerospace, electronics, consumer products, computer, telecommunications, retailing, internet, software, professional and financial services industries.

10 COMMENTS

  1. very interesting concept. But I ask if you are looking to change human behavior (and entire culture) has not monetary based incentives historically lead to some of the issues we are currently facing…..

  2. Interesting point, monetary incentives, like virtually everything else are a double edged sword. They can be tremendously positive in helping people achieve goals, or they can create terribly destructive behaviors.

    Let’s hope we design to motivate the former and restrict the latter.

  3. I read this article with interest – more so because it largely misses the entire concept of what marketing should be to an organization. It seems to regress to the decades-old concept that sales is the predominant being in driving profitability – a concept that became extinct about the time of Willy Loman.

    Just what is today’s marketing? To even comprehend the answer, one must first understand that marketing is “strategic” – while sales is “tactical.” Marketing positions the entire enterprise (along with the sales force) to win – while the sales force carries out missions to be won. Winning in this context is providing “wins” for the customer AND the enterprise – of course.

    To put it simply, marketing is in the business of finding customers, and keeping them. I differ with Mr. Brock in his simplified question, “Isn’t marketing’s job to be supporting sales?” Of course it is, but sales is only one function marketing should be supporting. In fact, marketing should be supporting the “entire” enterprise. Marketing should support everyone and every job – and marketing should support the prospects and customers of the enterprise, as well. Is there anyone left on the planet who thinks marketing is only for creating ads, brochures, catalogs, web sites, and the like? Maybe, but not in companies that excel.

    Marketing must accurately assess the entire environment; understand consumer or business attitudes, needs and trends; evaluate the competition; evaluate the economy; understand costs and the resources of the enterprise; stand up as a customer advocate; position the enterprise and its offerings; gain chief executive and board buy-in; execute strategy derived from all that; communicate to the enterprise’s audience and then closely monitor the results.

    As to putting the marketing team on commissions – perhaps there might be some way to do this. Confident marketing teams have no fear of justifying their being – but it is a slippery slope to start using the already antiquated formulas of sales commissions as some sort of model for marketing – or any other corporate function. Perhaps we should put Accounting & Finance on commission, as well – and perhaps even the Human Resources team. If so, let’s ditch the sales model and start totally anew. As for mission alignment among departments, the company that hasn’t already done this through an MBO-like approach is decades behind the curve.

    Overall, Mr. Brock’s attention to the subject seems to have little appreciation for the contemporary concept of marketing – and that is a situation most alarming, for if you don’t understand the physiology of the “patient,” it is best not to perform surgery on it.

    William H. Thompson
    Principal
    Thompson Group Marketing
    Walnut Creek, CA

  4. So long as we’re kicking around ideas — like putting marketing on commission — why not consider NOT putting sales reps on commission?

    Isn’t part of the problem with the sales profession is that it’s perceived to be “coin operated” — just put up commissions and reps will do just about anything.

    So how about putting sales reps on a salary just like the rest of the organization, and rewarding them for being part of a team effort.

    Oh, and instead of a commission, put everyone involved in the team on a bonus plan that pays not just for new deals, but also for customer satisfaction, loyalty and retention — you know, what really drives business performance.

    Instead of replicating a flawed compensation model from sales to marketing, why not a fresh start that pays the entire team for performance?

  5. Bob, you already know I’m schizoid. There are a lot of merits to your suggestion. Too often, we use financial incentives and commission plans as our only way of managing performance. Sometimes, they are so overused, that we get into a death spiral in our thinking. Commissions are viewed as entitlements, ever escalating expectations of commissions, etc.

    Sometimes, I think clearing the decks and starting with a fresh concept that drives the desired behaviors is best–whether it is team behavior, individual, etc.

    Thanks for the contrarian view, I think there is real merit to considering the approach. Regards, Dave

  6. William: Thanks for the thoughtful comments. Some of your criticisms are very appropriate and well taken.

    In the original article, I was looking only at some specific aspects of marketing and not the complete job of marketing. The marketing function tends to be in the eye of the beholder, with many organizations organizing the marketing function differently across things like corporate communications, product marketing, product management, strategic marketing, marketing programs, and many other things.

    When viewed across the board, marketing does support many functions. I did not intend to mislead or intend to view marketing as only in service of sales and should have been more careful to state that I was only addressing a small aspect of marketing.

    I also think the roles of marketing and sales in supporting each other tend to vary tremendously across industry sector and segment.

    At the same time, marketing and sales are going through profound changes, driven by the changes in the way customers buy. Too often, we still see silo’d organizations, neither coordinating strategies, priorities, programs and initiatives; each pointing fingers at each other, neither accepting or sharing accountability for results. There is much anedotal and quantitative data supporting the lack of alignment of sales and marketing, and the challenges this creates in driving overall effectiveness in the markets.

    I would argue the MBO approach has been well known for years, but has also been well abused by many for years. It’s not the approach that’s problematic, it’s the lack of alignment of goals and objectives (MBO’s if you will), or simply wrong goal setting that creates great problems across functions and organizations. Organizations and executives have become very adept at leveraging MBO’s to protect fiefdoms, drive self interest, and destroy corporate cohesiveness in achieving overall corporate goals.

    It’s not the method, but the implementation/execution of that method that fails (the same can be said of virtually other approach as well).

    Each organization is increasingly interdependent, and their work processes need to be interleaved. I tend to think we need to rethink our marketing and sales structures, programs, metrics, and approaches. We need to organize and align around the new buying model, not archaic models of both selling and marketing.

    I do believe there is tremendous power in aligning selected metrics across sales and marketing, sharing accountability, and potentially sharing incentives. If that means a “commission program” for marketing then that’s fantastic.

    I wouldn’t condemn commission programs as antiquated, and I don’t think you are saying that. There are well designed commission and incentive programs, and poorly designed commission programs (another one of those pesky double edged swords). I think there can be some merit to these kinds of programs, though they are not the exclusive solution. There can be other methods both for sales and marketing as Bob Thompson suggests.

    And as you suggest, as I also suggest in my original post, I have no trouble putting everyone in the corporation on some sort of incentive/commission program. Some manufacturing companies still pay people by piecework–a form of commission program. Virtually every functional executive of major corporations that I work with is under a “bonus” program of some sort. Perhaps it’s time not just to consider those executives as the only one’s eligible for bonus/commission, but extend that to everyone in the organization? Perhaps there are other ways to drive and reward great performance within the organization.

    My goal in the article was not to advocate a specific solution, but to use the article as a platform for thinking about what we do, how we better align across functions, how we drive higher leversl of performance—and to think about it differently.

    Thanks for taking the time to comment. As usual, the comments and the discussion prove to be better than the original article itself. Regards, Dave

  7. William,

    Great response. I couldn’t agree with you more – except that there does seem to be a great many businesses that think ‘marketing’ is ‘marketing communications’ and since they are also growing, they can’t see the need for someone that isn’t writing copy, designing websites or working trade shows. (Cut that research budget – can you design a flash intro for the website’s home page?)

    And to make matters worse, there are lots of people with titles like ‘Chief Marketing Officer’ and ‘Senior Vice President of Marketing’ that are either MarCom people or Sales people.

    Finally, as for putting marketing on ‘commissions’, I just have to wonder how that differs from ‘bonuses’ – which many marketing people already have in their comp plans.

    Thanks for a great read – looking forward to more comments.
    Pat

  8. Spears are for Front liners…
    Arrows for Back Liners…
    Equip everyone with spear and your company will face failure.

    Marketing is about building the overall company in a marketing & manegemnt manner while supporting sales at the same time. Development in other areas as well as direct sales support ensure not only short but also long term growth. Shift the equation and you will have a myophic & short term focus that is geared in getting those sales in and getting as much commission.

    Combine this with HR manpower cycle and you will have a full aggresive sales oriented company that can make ingreasing profit and super fast growth, but will it last.

    Regards,
    Jimmy Chan
    CIM

  9. A direct hit to the point that True Marketing lies not only in helping sales in encompasses building the entire organisation for it to be strong from foundation up as well as strategically.

    Regards,
    Jimmy Chan
    CIM

  10. Good effort to bring out concept to consider but rather than focussing on a part of marketing to be considered for commission consider marketing as a whole, splitting marketing is like splitting cohesion & developing a sub sales team which will evolve to sales progressively.

    Apart from that we already have bonusses supported by measurement through HR Tools or by the Head of marketing that ensures the totalitly of the effort helps the organisation with a close eye to sales as Marketers we too realise that without sales there’s no marketing so why the need of commissions when there is danger for a sales oriented culture that shortens the life of one’s organisation.

    Regards,
    Jimmy Chan
    CIM

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