specified in advance.” The behaviors we need from a successful salesperson— reacting to and even anticipating customers’ needs— are ones we cannot specify in advance or realistically measure upon completion. Can we say George scored nine on being proactive but Sam only scored 7.5?
The book also points out that managers often give more priority to insuring that their courses of action are justifiable than that they are correct. A commission system legitimizes decisions about sales force compensation because it is tied to a reproducible number. A manager who instead makes compensation judgments based on knowledge that is tacit, implicit or understood, but that is not easily explained, takes a career gamble. Why risk a job-threatening confrontation with superiors over a decision that was clearly dictated by experience, but for which a documented rationale cannot be supplied?
As Pfeffer puts it:“… if expert knowledge has some component— probably a substantial component— of tacit knowledge, it will be impossible for those with the expertise to present the real basis of their judgments and decisions when called upon to do so. How can you describe to others insights and intuitions based on judgment and expertise? What is likely to occur is simply this: When those with expertise are called on to explain their decision processes or to account for their decisions, they are likely to rely not on the tacit knowledge and judgment, which cannot be articulated, but rather on those factors and evidence available and accessible to all.”
Sales figures are an example of information that can be made“ available and accessible to all.” Assessments of a customer’ s satisfaction, while more important, are qualitative. Does George rate 9.5 on anticipating customers’ needs and Sam 8.5? Who says so? Why do they say so? It is so much easier for managers to justify their decisions based on the last cell of a spreadsheet, even when those numbers lack statistical significance. Pfeffer calls that“ a confusion between‘ math’ and‘ management.’”
A straight commission system also costs Bigglie more in salary than it probably would pay otherwise. Let’ s take the example of an open sales position. Our candidate has living expenses that require he seek a $ 50,000 per year position. Instead, we offer him a job that has a commission range of $ 40,000 to $ 60,000.
With all of the outcomes from $ 40,000 to $ 60,000 equally likely, your brother the insurance actuary would call this actuarially equivalent to a $ 50,000 salary, but simple logic shows most applicants would choose a $ 50,000 salary over our variable offer. Suppose most applicants were willing risk takers and $ 40,000 to $ 60,000 in variable pay were preferable to a $ 50,000 salary. It would be easy enough for a person enjoying a $ 50,000 salary to convert it to a variable salary of $ 40,000 to $ 60,000. Just take $ 10,000 to Las Vegas and( ignoring the fact that roulette wheels are not exactly 50 percent red and 50 percent black) bet on red. Las Vegas gives people with fixed salaries the opportunity to convert to variable outcomes, but only a small percentage choose that option. To most people, $ 50,000 is more desirable than the $ 40,000 to $ 60,000 variable option.
This should not come as a surprise. Most people have monthly responsibilities to pay mortgages, rents, car loans, and credit card bills. Without a consistent paycheck, they run the risk of not being