When Quotas Don't Work
At Prosoft, a $10-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're on salary and share in year-end profits. That's hardly typical; most companies pay their salespeople some combination of salary and commission. Until last year so did Prosoft.
Too often, Prosoft's reps would focus more on what customers (such as government agencies) had budgeted to spend than on what those customers' real needs were. "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."
In 1992 Prosoft made its first-ever profit-sharing contribution to its 401(k) plan and paid all 115 employees a year-end bonus. Last year sales compensation increased 7% on average; sales grew 250%, all contracts were renewed, and Prosoft secured $20 million in new multiyear contracts. -- Susan Greco
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