Pay Sales Reps Same as CEOs!

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  1

  dave.stein@...

  01/21/09 | Report as spam

  RE: Pay Sales Reps Same as CEOs!

  A related perspective...
  
  In 2003 I was first hired by the Irish Government to facilitate what would be annual, two-day sales "bootcamp" seminars for Irish CEOs. The objective was for them to understand what was required to build an effective sales infrastructure within their companies.
  
  Each year I ask the same question to the 25 or so CEOs attending the program: "Would you be willing to write a check to a salesrep for a million Euro?" A bit of market research, you might call it.
  
  I nearly got attacked in 2003. "Never!" "That may work in the U.S., but not here." "Not part of our culture." The CEOs were hostile. Really. I realized I had my work cut out for me.
  
  Over the period of five years, quite a lot of education was provided these and other CEOs. The Irish Government has been highly committed to raising the sales effectiveness of Irish companies--those exporting products and services as well as those selling within Ireland itself. Real progress has been made.
  
  When I again asked the question this past September to a total of 40 or so CEOs, only one CEO said he had a problem with the concept. Every other participate understood that sales is closest to the cash register, and if that register isn't ringing steadily, no one is going to get paid.

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  2

  ptiseo

  01/21/09 | Report as spam

  RE: Pay Sales Reps Same as CEOs!

  My answer to your question of "Would you be willing to write a check to a salesrep for a million Euro?" would be:
  
  "Yes, conditional on that rep bringing in about 10mil in gross sales."
  
  (Assuming total sales comp is 10% of revenue and the sales rep is 100% commission. Of course, we could get on the fallacy of 100% commission, but another time, another place, another beer...)
  
  You wouldn't like to have me in your classes...

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  3

  ptiseo

  01/21/09 | Report as spam

  RE: Pay Sales Reps Same as CEOs!

  Oh, and I would agree with Geoffrey too. CEOs get paid way too much when lots of that money could be better applied in various ways to actually strengthen the company.
  
  CEOs are like athletes. Very, very few can actually carry a team, but they get paid so much, they "skew the market" upwards and all CEOs become overpaid.

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  Geoffrey James, Sales Machine

  01/21/09 | Report as spam

  RE: Pay Sales Reps Same as CEOs!

  Alph: Not sure the athlete paradigm is a good parallel. People watch sporting events to see the athletes, so they're the product. Nobody ever bought a Toyota because they're a big fan of Katsuaki Watanabe.

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  dave.stein@...

  01/21/09 | Report as spam

  RE: Pay Sales Reps Same as CEOs!

  alphadogg:
  
  10% was precisely the number I used.
  
  And I'd welcome you in my session any time.

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  6

  ptiseo

  01/21/09 | Report as spam

  RE: Pay Sales Reps Same as CEOs!

  Well, no metaphor is perfect, and arguably someone like Steve is as much a product useful to Apple as the iPhone.
  
  What I was (poorly?) trying to say is that there may be a very few CEOs worth paying a pretty penny. These would be CEOs that are heavily networked, both in business and government, that can really move money, and that can effect some big changes out of a good mix of charisma and experience.
  
  They carry a high premium. They are worth the money.
  
  But, they are excruciatingly rare.
  
  The effect, though, is that it makes it seem like all CEOs should be overpaid; they skew the market. Like athletes.
  
  The problem, like you say, is there is no countering force, except a sane board of directors, which is often populated with the same people.

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  Geoffrey James, Sales Machine

  01/21/09 | Report as spam

  RE: Pay Sales Reps Same as CEOs!

  Quote from alphadogg:The problem, like you say, is there is no countering force, except a sane board of directors, which is often populated with the same people.
  
  Or as I like to say: "Business Intelligence: Corporate America's favorite oxymoron."

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  trebohm

  01/22/09 | Report as spam

  RE: Pay Sales Reps Same as CEOs!

  At several of the companies I've worked in the top sales reps did earn more than the president (total commission paid vs. president's base salary) and some fanfare accompanied that revelation. Of course the presidents' total compensation packages (with bonus, options, etc.) were not publicly known. Still, the illusion proved to be a very powerful motivator for the sales force and it gave a reasonably believable illusion of integrity and transparency.

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  tsutherland@...

  01/22/09 | Report as spam

  RE: Pay Sales Reps Same as CEOs!

  i think if more CEO were paid like their sales reps, they would help all the sales reps instead of stuffing their own pockets while the ship goes down

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  topo_abeleda

  01/22/09 | Report as spam

  RE: Pay Sales Reps Same as CEOs!

  Japanese companies make it a point that the CEO only makes 40x the lowest paid worker..not the top salesmen...which I believe is just.
  
  Being in sales, it really hurts that most of us have measly salaries compared to other executives..whether HR/IT/Finance and it is true ..we are the cash register so why give them higher salaries, the justification being we have commissions..precisely, this is for what we contribute over our targets and not for our salaries.
  
  Why do we need 20 svps, vps etc? Most corporations are so top heavy and the only reason they don't tank is because of their sheer size...when crisis kicks in, who gets the boot? Sales of course, because we need to increase our targets so we could finance these vps.
  
  I love this crisis, maybe we would realize that a company exists for sales and all the rest our support groups.

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  elwgreen

  01/22/09 | Report as spam

  RE: Pay Sales Reps Same as CEOs!

  I am afraid that if our CEO was suddenly limited to a payscale that matched the sales team he would end up like that nut you posted about a few weeks ago running around the stage screaming like kid with a new birthday present except he would probably be doing that with the sales folks in front of the customer.

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  woodhouse6@...

  01/22/09 | Report as spam

  RE: Pay Sales Reps Same as CEOs!

  Are you crazy or just stupid?
  
  Apple's market cap is $80 Billion. A 5% drop is $4 Billion. So Mr. Jobs is woth $4 Billion!
  
  I think your motivation stems from not managing to acheive what CEOs have. Namely, success.
  
  Be aware that the long term success rate of CEOs is currently under 50%. Would even the lowest paid worker take a job knowing that within the next two year he has a coin toss of a chance of being sacked and will have to take a cut in salary and pride while he waits for perhaps years to find a new post?
  
  CEOs have to make decisions that affect EVERYONE. That responsibility alone is huge. A sales person never has to make ANY decisions that affect anyone else, and they must be paid the same? Rubbish.
  
  Rather than complaining about CEOs salaries, and BTW you sound like Starlin, why don't you work smarter and harder and enjoy the fruits of your own success.

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  jslocum1@...

  01/23/09 | Report as spam

  RE: Pay Sales Reps Same as CEOs!

  CEO pay in most large companies is out of control and for the reasons you indicate. Paying them based on their sales reps .. I'm not so sure. As CEOs are generally very greedy and self-focused, they would generate a sales compensation plan that would make the top rep a ton of money adn therefore themselves. This in spite of the impact on the company and the true value of either class of people.

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  SteveLanning

  01/23/09 | Report as spam

  RE: Pay Sales Reps Same as CEOs!

  Woody you do have a good point in that the pressure of every decision is going to affect nearly everyone in the company nearly every time takes its toll on people.
  
  After owning a company for several years and then selling it, it feels like a vacation to now be a business coach or consultant within a company and not bear that pressure of a CEO.
  
  Yet I have to agree with your premise Geoffrey and the tone of the majority of comments. Salaries should have a formula closely tied to the top 20% of the sales force in some way.
  
  This formula also weeds out the whiz kid types that run up share prices for a brief time (if their salary is tied to share price/whatever) without developing true shareholder value.

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  SteveLanning

  01/23/09 | Report as spam

  Quick post script...

  I was going to add to the good Dave Stein points that this/his way also eliminates the incompetent 'Peter Principle" person who gets promoted beyond the level of their competence.
  
  Exhibit A that we in the US will be witnessing over the next four years is our newly elected President. I really felt sorry for him the other day when, on his own Executive Order, he had to publicly gain the approval of the WH Legal Counsel..."Is that right, Greg?" One gets the odd feeling that someone else is pulling his strings. I do pray it isn't so.

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  Geoffrey James, Sales Machine

  01/23/09 | Report as spam

  RE: Pay Sales Reps Same as CEOs!

  From a reader:
  
  You are quite correct - CEO pay that is determined within a self-interested support group is likely to be distorted, certainly not a function of a properly functioning market.
  
  I have heard of MDs / CEOs sacking their sales directors because they earned more than the top man. That's clearly ludicrous, as the salesman is the one creating the revenue and should be rewarded for it. Very few CEO packages are based on performance in the same way that the average sales rep remuneration is.
  
  Even those elements that are supposedly subject to performance issues, such as stock options, are subject to distortion and short-termism, but that's probably another story.
  
  Yes, tie CEO salaries to the best performing sales reps. Excellent idea!
  
  Nice article.

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  Promo MOE

  02/02/09 | Report as spam

  RE: Pay Sales Reps Same as CEOs!

  1st & Formost. No one should makemore than the president of the U.S.A.! CEO's Have a gift of vision. A majority of sales Reps have a gift of greed. So yes CEO's should get a small % higher pay than the Sales Rep. All money earned over the President of the U.S.A. salary should go to a community pot, which then goes toward paying off the Debt of the U.S.A., Homeland security!! & Tax relief.