>Its a pretty common problem in sales. Lots of sales people are constantly moving jobs and pushing their numbers up.

HackerNews:

Wells Fargo presses sales people to fake sales: Send those executives to the guillotine! (this was literally said by a top comment on one of the threads).

Tesla presses sales people to fake numbers: Nothing to see here, standard operating procedure.

If/when these companies fold, I hope the rabid supporters are held to account.

SolarCity, not Tesla.

Who are these poor souls paying out bonuses and commissions on unrealized revenue?

Commission typically isn't paid out until the company is paid in my experience. Bonuses are different, but some companies I work for actually tracked how many orders were actually fully paid for vs. how many were entered into the system. A concerning number of salespeople would basically sign people up if anything the customer said could be construed as being interested, and their numbers would look great until you looked at the number of sales that fell through.

I never has the most sales in a single month when I worked sales, but I regularly had the highest realized revenue because every single person I signed up actually wanted what they were purchasing.

This was all over the cell phone industry when I worked networks side. This was pre-iPhone era, just to give an idea how long ago.

I traveled around metro areas measuring signal quality, simple upgrades or maintenance, often stopping at nearby retail outlets rather than laptop in the truck.

I’d get to know the store staff and they’d talk freely around me about “fake” signups to juice numbers.

The trick was sign em up at end of month, cancel them before a bill got sent. That way the store appeared to hit their monthly target.

They’d often do fleet style signups; construction company would come in legit looking for 10 lines, the store would sign up 20 phones for construction company. Then return half before the 14-day no questions asked period.

This was going on all the time, across multiple stores, as far as I could tell. The details would change, from construction to startup or new business needing phone in a hurry.

Heh, the same game gets played in retail commissions.

Didn't hit numbers for the month? Buy a bunch of your own product, wait a few days until the next cycle starts, then return it all.

When everyone pays bonuses on unrealized revenue it puts you at a hiring disadvantage to pay bonuses off of realized revenue only, or to cut future bonuses when revenue doesn't materialize.

Yes, it in fact does put you at a hiring advantage because it will select for employees actually selling products instead of claiming to sell them.

Realized revenue will always be a percentage of unrealized revenue less than 100%. So by definition paying off of realized revenue at the same rate means you're going to be paying less in commissions to your sales staff.

If I'm a salesperson looking for my next gig you're going to have to prove that you're paying a high enough commission for it to be worth it to me.

But most importantly, why would a salesperson who can make a $15k commission immediately work someplace where they need to wait for the sales and billing cycles to complete? That could easily be 30-60 days after start and will put you tens of thousands in commissions behind your competitors. And if a salesperson quits or is terminated do they still get commissions 30-60+ days in the future? Unlikely, especially if there's any bad blood.

From a business standpoint it's easier to pay on unrealized revenue and decrease the overall commission amount such that it's still profitable even when you're paying commission on money the company doesn't see.

See also the Ben & Jerry's management salary thing.

Which is what?

Back in the early days, Ben & Jerry's had a policy limiting upper management salary to a (small) multiplier of the pay of line workers. They were subsequently "unable to hire qualified management" and removed that policy. It was a minor kerfluffle.

There can be a lot of weird bonus structures kicking around too. For a while, my girlfriend worked in sales at Oracle, and while they were trying to push their cloud offerings, the had some crazy-pants bonuses for any cloud sales; on the order of $4-6000 a quarter if you sold cloud subscriptions. So she got her dad to buy $300 worth of hosting for his auto parts side business, and collected 20x that in bonus.