The 100% Commission Mindset

As leaders, how do we create customer-focus throughout our organization? It is often easy to get distracted by internal issues and forget the customer. A recent experience suggests that perhaps our mindset needs to shift to what I call the “100% Commission Mindset” to encourage more customer-focused thinking and behavior.

I recently led a multi-day learning event for high potential leaders at a global technology company. On the last night, the local executives for this company gathered for a networking reception. At one point in the evening, I found myself in a circle of people from different parts of the company – sales, marketing, HR, R&D, finance, plus me.

The conversation turned to a topic of interest for everyone – compensation. The discussion centered on how each person’s compensation was structured. I listened as the various formulas were discussed. The sales executive’s compensation was about 60%-fixed with 40% performance targets, while his team of direct reports had lower base compensation and higher commission potential. The marketing, HR, and R&D folks had much higher fixed compensation and lower variable compensation. After a few minutes, one person in the group turned to me and asked for my thoughts on the subject.

I told the group that “I am on a 100% pure commission plan.” The facial expressions of the people in the group shifted dramatically indicating shock and surprise. One person asked “how do you do that?”

Here was my response:

I started my company five years ago and I am the sole owner and employee of my business. Every single dollar that comes into my company comes from my customers.

• No matter how good I am at what I do, if I don’t sell it, I don’t eat.
• Every single cost in my business must be paid for out of customer revenue or the cash in my bank account.
• If I don’t generate enough client revenue, then eventually I run out of cash.

I get as much unpaid vacation as I want. Even my “paid” vacation is paid for by the customer.

I am not suggesting that you put everyone in your company on a 100% commission plan. There are many good reasons to structure compensation differently for different roles, different types of people, and different stages of the company.   For most situations, pure commission sales plans create big problems in attracting talent and establishing the right strategic alignment.

However, this experience got me thinking about the impact of compensation structures on our mindset about customers. If most of your compensation is fixed, does it cause you to neglect the customer, since you are getting paid anyway? What would it mean for your business if you got everyone in your organization to adopt a 100% commission mindset?

Let’s examine a few principles of the “100% Commission Mindset”:

• Everything we do ultimately must be paid for by our customers. Customers not only pay for products and services, but they pay our salaries and benefits. They pay for all of our vacation, sick leave, and perks – ranging from company parties to candy in the lobby.
• If our customers do not value what we do, they will not pay us. They will go elsewhere and we will eventually go out of business.
• If we want more money coming into our business, we need to create more value for our customers.
• If we don’t understand specifically what our customers value, how can we sell and deliver it?
• If we are frustrated with our current customers or clients because they don’t seem to value what we do, then we either aren’t establishing that value or we need to find customers who do.
• If we have investors who are financing the company right now, it is because they expect that we will attract customers. The only way to pay them back ultimately is with revenue and operating cash flow from customers. So if we are foregoing revenue now to invest in the future, we’d better make sure that we are building something that customers will buy.

I have found that this concept of “100% pure commission” has helped me in my business by creating incredible clarity of focus on the client based on my own self-interest in survival and success. What would shifting your mindset do for your business?