Are You Slowly Killing Your Firm with Commission-Based People?

by Tom "Bald Dog" Varjan, Organisational Provocateur

Over the years I have seen many times that otherwise reputable firms are gradually destroying themselves by hiring commission-based people, especially for business development.

People at most Professional Service Firms have a stigma attached to the word "sales" and "selling". Many people rebel, saying, "we are consultants, not salespeople".

Top management tends to say, "All right. Let's hire some commission-based business development people to bring us some business."

And here lies the first problem. So many consultants hold themselves at high-esteem, but if it were up to them they would die of starvation, for they are unable to land business for themselves.

Using Douglas McGregor's (American social psychologist) categorisation, people fall into either of two major behavioural category:

Theory X: People are inherently lazy, dishonest, dodge responsibilities, dislike work, thus they must be tightly controlled, coerced, threatened and punished. People have little ambition, want unconditional work security and prefer to be directed, for they do not like thinking for themselves.

Theory Y: People are inherently like challenge and responsibility. They are innovative and proud of their achievements. They can practise self-direction and self-control. People are willing to learn new skills, are creative and capable of thinking for themselves.

What happens at many firms is that consultants are treated as "Y" people, whereas business development people are treated as "X" people.

I have recently completed a business development project for an IT firm, where one of the consultants openly admitted his resentment for marketing, for - in his opinion - it was all about lying, cheating and deceiving people, tricking them into buying their stuff. The firm's mantra was: "Stretch billable time whatever it takes."

So, are commissions killing client relationships? I reckon they are.

In a firm where consultants are paid salaries but business development people are paid commissions, they actually work against each other.

Consultants can relax and do their normal work, whereas the commission-based business development people are feverishly running around trying to land new business in order to pay their mortgages and feed their families.

When I ask the audience at my presentations and workshops to describe salespeople, the final the message is always the same: "Do whatever it takes to make the sale."

Why do you think many car salespeople and realtors have the kind of reputation - all right, let's call it notoriety - they do? Yes, the plagued commission payment structure. They are good people compensated the wrong way.

Some problems with paying commissions to business development people:

The firm's integrity gets undermined by forcing business development people into convenient expediency, and rationalising their opportunistic approaches for the sake of the quick buck. They will focus on the low-hanging fruit, even if taking them can ruin future, more lucrative opportunities.

Business development people can do their works in such a way that is beneficial to them but can be detrimental to their firms in the long run. However, by the time the shit hits the fan, all the business development people are gone, leaving the others to suffer from the consequences. When we consider the very high turnover rate of business development people, we can understand how little they truly care about their firms.

And why should they? Do their firms care about them? Most often not.

And this is not because they are bad people. This is just a response to the initial behaviour of their firms that treat them like crap. Firms started the process by sending them the wrong message. Do you remember the scene in the movie Ben Hur, when Quintus Arrius, the new consul goes down to the belly of the galley and makes an announcement to the slaves: "You are all condemned men. We keep you alive to serve this ship. So, row well and live."

This is exactly the announcement many firms send to their business development people. "We tolerate you so long as you can make us money, but do not expect us to treat you as a professional. After all, you're just a bloody salesperson."

Business development people are forced to focus on short-term money-grabbing. Although this is congruent with most firms' focus.

They can create immediate extra revenue for their firms, but neglect to deepen relationships with clients, thus ruining the chance of return business, thus undermining the firm's reputation. Sooner or later the firm will be regarded as a vulture, preying on clients by "twisting their arms" until they agree to pay.

Following the leader's example, people operate out of insecurity. It is actually a sign of leaders' desperation to pay commissions to any of their people. The basic message is: "Look, our service is crap, but if you can find a fool or two and screw them out of their money, we will pay you for it." If firms' leaders do not believe in their own services, then they should get steady 9 to 5 jobs.

Business development people can find new leads and prospects, but more often than not it is the consultants who blow the deals, due to their sales-allergic mentality and lack of sales skills. But when the deal is blown, business development people suffer from lost commission, while consultants enjoy their fix salaries. They may lose a bit on profit sharing but nothing serious.

The commission structure also destroys morale within the firm by setting up a nazi-type system: The consultants (the superior race) at one end of the battlefield, and the commission-based people (the inferior race) at the other end. And they are in constant battle with each other.

Commission-based people focus on making the sale, even if they have to drastically reduce fees. They still get some commission, which may just be enough to pay the mortgage or the VISA balance. At the same time, consultants get frustrated for they work for lower than normal fees. That can easily create resentment for projects and even worse, resentment for clients.

Your firm can have only 100% of its talents, resources and energies. You can direct them either outwards – quality service, marketing, client care, etc., or you can waste them internally in the forms of interoffice conflicts, multiple agendas, duplicity, "dilbertism", lying, cheating and stealing.

Summary

If firms' cultures are so "dilbertian" that their leaders have to manipulate their people with conditional payment (the professional equivalent of parents' manipulating their children with conditional love), that firm, or more accurately, that leader is in deep shit. As the saying goes "Fish rots from the head", and this is exactly what is happening to many firms. Leaders fail to create conducive cultures which excite, enthuse and empower their people to do their best every single moment.

Referring back to Theories X and Y, I personally believe most people are hard-working and conscientious by nature, and it is firms' cultures - as set up by their leaders - that defines what sort of people firms attract and repel.

As the saying goes, like attracts like. So, if your firm has some undesirable people, then look at yourself. You attracted them in the first place, then you hired them and still keeping them. There is nothing wrong with them. That is what you asked for.

Anyway, you cannot manage people. You can, however, create a great ecosystem in which people thrive without being managed.

When managers have to walk around and prod people to perform better, that is not a professional service firm, but a concentration camp. There may not be barbed wire, armed guards and gas chambers to terminate underperformers, but the atmosphere is exactly the same.

Using Tom Peters' words: "Leadership is the process of engaging people in creating a legacy of excellence." And when the creation of a legacy of excellence is replaced by coercing, threatening and punishing people to make more sales, whatever it takes, that is the moment leaders should just kill themselves for they failed their missions.

Business development dudes/dudettes are part of professional teams and must be compensated in the same way as the others. This is a very basic requirement of helping people to work towards the same vision.

Otherwise there will be a conflict of interest. Consultants want to build long-term, lasting relationships, but the business development folks focus on quick money-grabbing. And clients can sense that.

While I believe in having a business development co-ordinator on board, I also believe every single person on the payroll must contribute to business development. The professional service firm is the only form of business in which - ideally - the same person pitches and performs the work. When professional service firms start employing sales people, that is when we can say that their focus has shifted from helping people to selling a commodity.

Unfortunately, following the examples of some accounting behemoths - some 95% of firms do just that. How sad.

Alfie Kohn wrote in the Harvard Business Review (Nov/Dec 1993): "Pay your people well and fairly, and do your best to help them to forget about money."

Copyright 1997-2008 Tom "Bald Dog" Varjan. All rights reserved. You are free to use this article in whole or in part. One favour though: Can I ask you to you include complete attribution, including a live website link. Also, can you please let me know where you plan to publish the article.

The attribution: This article was written by Organisational Provocateur, Tom "Bald Dog" Varjan of Dynamic Innovations Squad, a firm specialising in helping consulting firms to sell their expertise at the highest margins. Get Tom's free Practice Management Black Paper when you sign up for his monthly newsletter, Commando Consulting: Lessons And Practices From The Ultimate Professional Service Firm, The Military. Visit Tom's website at http://www.di-squad.com.

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