Most companies pay their salespeople some combination of salary and commission. At PROSOFT, a $27-million provider of technical services and training in Virginia Beach, Va., salespeople don't have a quota and don't earn product commissions. Instead, they are on salary and share in year-end profits.
Before the system was instituted, PROSOFT's reps used to focus on what customers (such as government agencies) had budgeted to spend, rather than on those customers' real needs. "I heard from disgruntled customers who needed additional support after going through our training," says cofounder Michael Adolphi. Repeat business dropped; sales fell flat.
Also, PROSOFT's engineers--who helped with sales presentations but got no help preparing lengthy bid proposals--thought commissions were unfair. Adolphi's solution: Drop all commissions and raise sales salaries to roughly match the engineers' pay. "The technical people are involved all the time now," says Adolphi. "And the salespeople help with the bids."
PROSOFT made its first-ever profit-sharing contribution to its 401(k) plan and paid all 115 employees a year-end bonus in 1992. A year later, sales compensation had increased 7% on average, sales grew 250%, all contracts were renewed, and PROSOFT secured $20 million in new, multiyear contracts.