Stuck in Their Ways

Forrest Gump

In the February 17 issue of the New York Times Magazine Robert Draper wrote an article titled “Can the Republicans Be Saved From Obsolescence?” The graphics are awesome; check them out.

Draper reported on a Republican-conducted focus group session in which a researcher asked what younger swing voters associated with the word “Republican.” When the facilitator wrote the word “Republican” on a whiteboard,

… the outburst was immediate and vehement: “Corporate greed.” “Old.” “Middle-aged white men.” “Rich.” “Religious.” “Conservative.” “Hypocritical.” “Military retirees.” “Narrow-minded.” “Rigid.” “Not progressive.” “Polarizing.” “Stuck in their ways.” “Farmers.”

Except for “Military retirees,” “Farmers,” and, perhaps, “Religious,” the focus group could have been talking about legacy media top management, especially the comment about “Stuck in their ways.”

And there is no better example of being “stuck in their ways” than the legacy media way of compensating salespeople, primarily on commission.

As Daniel Pink suggests in his best-selling new book, To Sell Is Human and in his Harvard Business Review article “A Radical Prescription For Sales,” “the reps of the future won’t work on commission.”

What if paying salespeople commissions is rooted more in tradition than logic? What if it’s a practice so cemented into orthodoxy that it’s no longer an actual decision? That’s what a handful of companies have begun discovering. To the surprise of many, these firms are showing that commissions can sometimes do more harm than good—and that getting rid of them can open a path to higher profits.

We know that most legacy media CEOs care about only two things: One, compensating themselves an undeserved, gargantuan amount of money, and, two, higher profits every year.

Don’t these CEOs read? Can they read? That’s a legitimate question, because either they don’t read (or can’t) or they do read about but don’t pay attention to the latest trends in compensation and often make their salespeople perform worse than they otherwise would by paying them the wrong kind of commissions. For example, using yield management programs to determine optimal rates and then paying salespeople commissions based on getting the computer-generated higher rates.

The assumptions management makes are: One, that all salespeople are motivated solely by money, and, two, that salespeople have control over the rates advertisers will pay.

Clearly legacy media managers are motivated by money, so they assume everyone else is. Plus, their bonuses are based on higher profits every year, so they assume all of their salespeople are interested in helping them receive a higher bonus. Wrong, arrogant, and stupid.

But stupid is as stupid does; even Forrest Gump knew that. And that’s what paying salespeople primarily on commission does – makes them stupid. Makes them hunters. And what do hunters do? They kill and eat their prey.

Upserve, Not UpsellCommissions, especially commissions based on higher rates or higher shares, force salespeople to treat their customers as prey.

But do you think the new media companies such as Google or Facebook, or companies such as Amazon or Apple consider their customers prey? Of course not. Their primary business strategy is to delight their customers, not kill them. Their salespeople are educators who, to use Daniel Pink’s term, upserve their customers, not upsell them.

Yes, legacy media top managers are stuck in their ways, particularly when it comes to compensating salespeople, and they can’t be unstuck from obsolescence any more than the Republicans can.

Author:

Charles Warner

Charles Warner teaches in the Media Management Program at The New School and NYU’s Stern School of Business, and is the Goldenson Chair Emeritus at the University of Missouri School of Journalism. Until he retired in 2002, he was Vice President of AOL’s Interactive Marketing division. Charlie’s book Media Selling, 4th Edition is an update of Broadcast and Cable Selling and is the most widely used sales textbook in the field. He has also written a companion book to Media Selling titled Media Sales Management that is available free on www.mediaselling.us.

  • CWduh

    Besides the fact that your article and its writing style is all over the place, your core message that compensation based on performance is inaccurate. There is nothing wrong with commission and a commission structure that is based on selling artibutes (loyalty, repeat business, referrals, etc.) you want to cultivate as a company and it is actually beneficial. Most smart salespersons know that repeat business hence relationship selling is the foundation of a good book of business and those people stay in the business and with their companies long term because they are successful together. The quick buck, slick salespersons who do treat their customers as prey do not last long and jump from company to company or tire and leave. Not to say that in some industries or some companies that different compensation models might work better, but to rule out commission based compensation as obsolete is inaccurate and does not take into account the diversity of even today’s business climate.
    Maybe you are obsolete…and next time please have someone read your article first before posting, besides the token political agenda you insist on putting in every article, you are not developing your assumptions or even your perspective with any clarity.

  • Rocker

    Hmmmm… the issue is really incentives. Gotta have them, gotta align them with creation of business value, whether by commission or some other means. But when you reference people like Google and Facebook “delighting” their customers, I have to ask – have you actually ever dealt with these companies on a B2B basis?

  • paula lynn

    From your bio, it looks like you have been out in the streets for a while or maybe never. Marketing compensation is a far cry from sales. In this sense, you are off the money. CWduh explains how to pay sales people so much better, not to mention critique of the article.