Sales commission structure: should you pay salespeople commission?

Why does every business pay salespeople on commission?

Your sales commission structure is probably costing you more than it earns. 91% of sales teams missed quota last year, according to QuotaPath’s State of Sales Compensation report (2023). If paying commission actually worked, they would. I get hate mail every time I say this in public. And it is almost always from sales leaders, the people who stand to lose status, income, or control when commission goes. The reaction from technical founder-CEOs running 50-to-250-person businesses is the opposite: they hear the argument and ask, “why hasn’t somebody told me this before?” I paid commission too, at Rackspace UK and Peer 1 Hosting, because everyone in the industry did. I have since changed my mind. Paying salespeople commission in a modern B2B business is an expensive habit built on two outdated assumptions: that all selling is transactional, and that salespeople are coin-operated. Neither holds up any more.

Commission is one of those beliefs nobody questions. It sits alongside annual appraisals in the big bin of “things we have always done.” Every new sales leader inherits the structure from the last one, bolts on an accelerator or two, and carries on. Psychologists call this status-quo bias. The current arrangement feels safe precisely because it is familiar, not because it works. The cost of inertia compounds quietly: bad-fit deals that churn at month six, comp disputes that eat your sales director’s Friday afternoons, A-players who quietly take the call from a recruiter because they have stopped trusting the number on their next statement.

Step outside the sales function for a moment. We do not pay developers per line of code. We do not pay support people per ticket closed. We do not pay the receptionist a bonus for every call answered. Because when we do, people behave inconsistently with what we actually want them to do. Developers would pad lines and split functions. Support would close tickets at 4 minutes whether the customer’s problem was fixed or not. Everyone knows this instinctively.

Yet somehow sales gets a free pass. The assumption is so deeply held that when I tell technical founders they do not have to pay commission, they look at me as though I have just told them the earth is flat. “Why has nobody told me this before?” is the most common response. It is not that they disagree. They just never thought to question it. That is how powerful a default becomes once it is embedded in an industry.

What does the research actually say about sales commission?

Matt Dixon, author of The Challenger Sale and The JOLT Effect, is arguably the world’s number one writer of quality sales books. I had him on my podcast and asked directly: where is the evidence that paying commission improves performance? His answer was blunt. “Dom, you are right. There is not any” (The Challenger Sale, Dixon & Adamson, 2011).

All of the research says the same thing. If you pay people to do more cognitive work, they do less of it or they do it worse. Consultative selling is cognitive work. You are persuading someone to do something they were not planning to do that morning while brushing their teeth. That is not piecework. That is judgement, timing, and trust.

Daniel Pink’s research in Drive (2009) reinforces this. Extrinsic rewards narrow focus, which helps on simple mechanical tasks but actively degrades performance on creative and judgement-based work. Modern B2B selling is firmly in the second category. Pink’s work builds on decades of self-determination theory: autonomy, mastery, and purpose drive sustained performance. Commission undermines all three.

In thirty years of running sales teams and coaching founder-CEOs, I have met very few salespeople who are primarily money-motivated. The exceptional ones I have hired and worked with were driven by status, influence, mastery, or purpose. Commission structures assume everyone is coin-operated. The behaviour I see on the floor says otherwise.

And then there is the number that should stop every sales leader in their tracks. 91% of sales teams missed quota last year. If commission worked as an incentive, they would. The very best performers in any cognitive field are driven by intrinsic motivation and flow, not by bonuses. McKinsey’s Susie Cranston and Scott Keller found that executives in flow report being five times more productive than they are on average (2013).

What does commission actually incentivise?

Commission does incentivise behaviour. Just not the behaviour you want. It incentivises the wrong customer, the wrong product, for the wrong reason. And all of that is entirely rational under a commission structure. The salesperson is optimising for their next cheque, not your customer’s long-term success. This is not a people problem. It is an incentive design problem. When you reward closing, you get closing. You do not get qualifying, retaining, or solving.

Reframe the diagnosis. You treat poor sales output as a motivation problem and reach for a bigger commission lever. It is almost never a motivation problem. It is a feedback problem. Your salespeople have no objective measure of whether today was a good day. Commission tries to substitute for that missing scoreboard, and does it badly. The fix is the scoreboard, not the carrot.

I have seen this pattern in practically every scale-up I coach. The leadership team calls me in because revenue is up but margin is down and customer success keeps escalating refund requests. I look at their sales commission structure and say: you are paying them to do this. They sign deals that are not good for the company or the customer because the incentive says close, not qualify. The downstream churn cost (the implementation hours, the success calls, the eventual refund) is brutal but invisible at the point of sale. The salesperson has already banked the cheque and moved on to the next quarter.

Here is what the top 9% look like. The salespeople who actually hit quota do not do it for the money. They do it for the status, the influence, and the self-esteem. I have hired enough of them to know it on sight. I have a simple interview test for this. Ask a candidate: “Tell me about your best ever deal.” The money-motivated ones lead with the size of the cheque or the kicker on their accelerator. The good ones lead with the customer’s problem and what was on the line for the buyer. Same question, two completely different answers. That single question tells you more about a salesperson than any psychometric profile.

The other 91% sit there, costing you pipeline quality and customer trust. And their managers defend keeping them because “they are cheap since they are not earning commission.” That logic is backwards. The cost of that seat is not the salary you are paying. It is the revenue an A-player would have generated in the same seat, minus what you actually got. Every quarter you keep the underperformer, you book that loss. You just do not see it on a P&L line.

What happened when businesses removed commission?

Businesses that removed commission outperformed those that kept it. The pattern is consistent across industries: replace the individual incentive with data, transparency, and collective ownership, and performance improves.

Steve Hall built Drivers Suck, a used car dealership in Dallas, Texas. Car sales is the poster child for commission culture. Hall removed it entirely. He flipped the model so that salespeople focused on getting the customer the car they actually wanted rather than the one with the highest margin. The business grew fast and was acquired at a premium. The only person who had ever done it in that industry, and the results spoke for themselves.

At Rackspace UK, where I was managing director, we paid commission like everyone else in the hosting industry. The thing that actually moved the needle on performance was not the comp plan. It was making call-time visible. We put real-time call-time data on wall monitors. The sales team set the standard themselves: a 90-minute floor. Within three months, everyone was clocking three hours plus on the phone, or they had left. I looked at the data and could see the best-performing salesperson spent four hours a day on the phone out of an eight-hour day. Rather than imposing targets from above, I went to the team and asked: what do you think is the minimum amount of time you should spend on the phone and not get fired? They huddled and came back with three hours. At that point, they were only doing an hour and a half. By their own measure, they should all have been fired.

What we did next was simple. We put monitors on the wall showing call times in real time. Everyone could see where they sat in the ranking and how much time they had put in that day. Three months later, every single person was exceeding three hours. No management intervention. No commission. No accelerator added to the comp plan. Just data and transparency. The team set their own standard and then held themselves to it. That is the power of visible performance data. When people can see where they stand against their peers, they move. The scoreboard did the work commission pretends to do, at zero variable cost.

Jack Stack, author of The Great Game of Business (1992), took a different approach to the same principle. He taught financial literacy to every employee in his manufacturing business. Once people understood how gross profit worked and how their actions flowed through to net profit, behaviour changed without any incentive scheme. Stack told me his favourite story directly. After he started teaching people how gross profit fed through to net profit, he spotted one of the cleaners diluting floor cleaner with water. He asked what he was doing. The cleaner said, “I am making a contribution to gross profit.” That is what happens when you replace commission with context. Give people ownership of the outcome and they start thinking like owners.

I have run a version of this exercise with the leadership teams I coach. We hand them Monopoly money and ask them to map where every £100 of revenue actually goes: cost of sales, salaries, premises, tax, profit. Most teams have no idea. They guess profit margins of 30%. The reality in their own business is closer to 8%. The room goes quiet. Once they see the real numbers (their numbers, not a textbook average), the conversation about commission, discounting, and deal quality changes inside the same afternoon. Context beats commission every time, because context is the thing commission is failing to substitute for.

If you are scaling a business and need support building a team that performs without relying on commission, working with a scaling up coach can help you implement the right structures.

How do you build a sales team that actually performs without commission?

Start with hiring. My definition of an A-player is the top 10% of available talent for a given job in a given location at a given salary. These people are not out of work. They are in a job, being successful, not looking. You are going to have to get them to leave. That means paying them properly.

From a gross profit perspective, I want a new salesperson to cover their salary in year one. In year two, I expect three times their salary in gross profit. And the best people will get you five times. That is the return profile you are solving for.

Here is where a lot of scale-ups get it wrong. Your best salesperson leaves and your instinct is to find someone cheaper. If you were Alex Ferguson the morning after winning the Premier League, you would not look at Wayne Rooney and think, “He is quite expensive. I wonder if I could find someone cheaper.” You build on your best. You do not replace them with a discount version.

Psychometric tools like Working Genius from The Table Group help spot role mismatches in sales teams quickly. A sales director with an enablement profile rather than a selling profile can sit in the role for six months producing nothing before anyone notices. Testing for fit before hiring saves that wasted time.

Use data, not incentives. The Rackspace call-time example was not a one-off. When you give people their own scorecard and make performance visible, they manage themselves. Gallup’s 2024 workplace data shows fewer than half of employees (47%) strongly agree they even know what is expected of them at work. The majority of salespeople have no idea whether today was a good day or not. That is not a motivation problem. That is a feedback problem.

Fix the base salary at market rate. Then add a collective profit-share rather than individual commission. When the whole team shares in the outcome, you remove the perverse incentive to close bad deals and replace it with a reason to care about retention, customer fit, and lifetime value.

For founders who want to redesign their sales compensation and team structure, business coaching provides the accountability and frameworks to make the transition.

What are the common objections to removing sales commission?

“My best salesperson would leave.” Separate commission from total compensation. If you are paying someone 60k base plus 40k commission and they consistently earn 100k, pay them 100k base. They are not leaving for more money. They are leaving for less hassle. You are not increasing cost. You are removing friction.

“Commission aligns incentives.” It aligns one incentive: closing. It does nothing for retention, customer fit, or lifetime value. Those are the metrics that actually drive a scale-up’s growth. A salesperson on commission who closes a customer that churns in six months has cost you money, not made it.

“We have always done it this way.” The 91% of sales teams that miss quota is the status quo you are defending. That is the system working exactly as designed. If you are comfortable with that hit rate, carry on.

“It is what salespeople expect.” Norms change. Steve Hall proved it in car sales. The expectation exists because nobody has offered salespeople something better. Pay the full market rate, give them data to manage their own performance, and tie a bonus to collective outcomes. The good salespeople will take that deal.

Does commission ever make sense?

Commission makes sense for transactional selling. If someone is shifting units off a shelf, pay per unit. But modern B2B selling is consultative. It requires judgement, trust-building, and long-term thinking. Commission is the wrong tool for that job.

The evidence is clear. Financial incentives degrade cognitive performance. The best salespeople are not motivated by money. And the businesses that have removed commission have outperformed those that cling to it.

So here is the question you need to sit with. You know the research. You have seen the case studies. You understand the maths. What is actually stopping you from removing commission? Because if the answer is “we have always done it this way,” you already know that is not good enough.

Frequently asked questions

Does removing sales commission work in every industry?

Not every industry. Transactional sales environments where the product is standardised and the selling cycle is short can benefit from commission structures. But in B2B consultative selling, where the average sales cycle runs 3 to 6 months and involves multiple stakeholders, commission creates misaligned incentives. Research from Matt Dixon confirms that cognitive selling tasks degrade under financial incentive pressure (The Challenger Sale, Dixon & Adamson, 2011). If your salespeople need to understand the customer’s problem before proposing a solution, commission is working against you.

How do you attract top sales talent without offering commission?

A-player salespeople are already employed and earning well. To hire them, you typically pay a guaranteed salary for the first 6 to 12 months anyway. The trick is continuing that model into year two and beyond. Fix the base at the total on-target earnings they would expect, then add a collective profit-share. In my experience, very few salespeople are primarily money-motivated. The rest respond more strongly to purpose, autonomy, and visible performance data.

What should you replace commission with?

Replace individual commission with three elements. First, a competitive base salary at full market rate, set at the total on-target earnings the salesperson would expect under a commission plan. Second, transparent performance data so salespeople can see their own metrics in real time. At Rackspace UK, putting call-time data on wall monitors meant the sales team self-managed from 1.5 hours to over 3 hours daily within three months, with no management intervention. Third, a collective profit-share tied to team outcomes rather than individual deals. This removes the perverse incentive to close deals that churn and replaces it with a reason to care about the whole business.

How do you manage underperforming salespeople without commission as a lever?

Give them their data and make performance visible. Gallup’s 2024 data shows fewer than half of employees (47%) strongly agree they know what is expected of them at work, which means the majority of salespeople have no objective measure of whether today was a good day or not. When people can see their own performance against their peers in real time, the bottom performers either raise their game or self-select out. At Rackspace UK, putting call-time data on wall monitors meant every salesperson could see exactly where they ranked. Within three months, every person on the team exceeded their self-set minimum without a single management conversation. The data did the managing.

Will salespeople just coast on a fixed salary?

This objection assumes salespeople are fundamentally lazy without a financial stick. The evidence says otherwise. The top performers in any sales team are driven by status, influence, and mastery, not by their next commission cheque. Remove commission and you still have those drivers intact. Add visible performance data and collective profit-share and you actually increase discretionary effort from the middle of the team, which is where most of your revenue potential sits. McKinsey’s research on flow states found that executives in flow report being five times more productive than they are on average (Cranston & Keller, 2013). The goal is creating the conditions for flow, not dangling a carrot.

Three ways I can help (ranked by impact, and by how much effort it requires from you)

1. Book a call. 45 minutes with me to look at your sales compensation structure, team design, and where commission is costing you deals. No obligation, no pitch. We will establish quickly whether what I do is right for where you are.
2. Grab the book. Mind Your F**king Business covers what I learned coaching 200+ founder-CEOs through scaling, including how to build sales teams that perform without commission.
3. Subscribe to the newsletter. Free framework every week. The sales compensation question is one of about fifty things scaling founders get wrong. The newsletter covers the other forty-nine.

Your move. Before you close this tab, do this. Pull up your current sales commission plan. List the salespeople who hit quota last year and the ones who did not. For the misses, add up the salaries, the CRM seats, the manager hours spent managing them, and the bad-fit deals they closed that churned inside six months. Now divide by deals that actually stuck. That number is the true cost per closed deal under your current structure. The founders I coach see it once and stop defending the plan inside a week.

What should you do next?

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If this post has annoyed you slightly, good. The issue is probably not effort. It is design. The business is asking you to carry decisions, standards and exceptions that should now belong inside the team.

The goal is not to disappear. The goal is to build a company where your best work is not dragged back into every operational tangle.

That is the point. Scaling is not adding more people around the same bottleneck. It is rebuilding the business so the bottleneck is removed.

Four ways to take this further

1. Book a call. If growth is now making the company slower, heavier or more dependent on you, I can help you decide whether the constraint is people, strategy, execution, cash or your role as founder. No obligation, no pitch. You will know quickly whether this is the right kind of help.
2. Grab the book. F**k Plan B covers these principles in more depth, with the practical founder lessons behind customer obsession, honest communication, hiring, small teams and managers who coach.
3. Watch: 5 founder mistakes that kill growth. Five founder bottlenecks that quietly stop growth between 50 and 100 people, and how to clear them.
4. Subscribe to the newsletter. Get direct, practical thinking on scaling, founder bottlenecks, leadership rhythm and building a company that can run without you in every room.

Your move. Open Slack, Teams or your inbox. Find the decision that should not have come to you this week. That is where the scaling work starts.

About Dominic Monkhouse

Dominic Monkhouse scaled Rackspace UK and Peer 1 Hosting as Managing Director, taking both to a £30m annual run rate. He is the founder of Monkhouse & Company.