Interesting. I wrote a particularly tricky piece of code today. It required much more effort on my part than some simple code I wrote last week, so I need to be rewarded for that additional effort. Oh wait, I am rewarded with a salary for doing what I was hired to do - solve problems writing code.
What FogCreek is saying is that it should be the same thing in sales. You're hired to do sales. It doesn't matter if it's $10 or a million dollar deal, that's your job. Why should it be any different than any other salary person?
Another interesting thing to me is when sales people talk about all their great sales, but seem to forget that someone created the product they are selling. If thought about in that manner each sale should cause the entire company to get paid. In fact, that's exactly what pays the salaries of everyone who works there.
Think of this from the perspective of an owner. If you are going to choose between two sales guys, one who pulls in $10 deals and another who pulls in million-dollar deals, who are you going to choose? OK, now that you've chosen the latter, how much are you going to pay him? Since there's no simple way to come up with an arbitrary worth, say you settle on a nice big offer for him. What if he stops producing stellar numbers (due to personal deficiencies or market forces)? Do you fire him or reduce his pay? Doing either is sure to infuriate him if external forces are at play, so the only alternative is a merit-based commission system.
I'm not saying it's right for companies who only pay sales commissions and don't reward coders--there absolutely should be profit sharing and bonuses for programmers with measurable contributions to the company--but this process is in place simply because sales' efforts are infinitely easier to quantify and reward (from a profitability standpoint) than are programming efforts.
My thought is that, just like in every other aspect of the business, your top players will be your highest paid as part of the normal compensation process--and those top people should be the ones closing the bigger deals. Just because you don't get cut a check for that specific deal doesn't mean there wouldn't be rewards for doing so.
What's the difference? In either scenario, you are rewarded proportionately to how much effort you put into landing one large deal or multiple small deals.
"My thought is that, just like in every other aspect of the business, your top players will be your highest paid as part of the normal compensation process--and those top people should be the ones closing the bigger deals. Just because you don't get cut a check for that specific deal doesn't mean there wouldn't be rewards for doing so."
I suspect commissions simply originated from sales reps demanding recognition for their efforts. Bonus structures and salary positioning through systems like FogCreek assume you have fair and competent managers who recognize and reward effort. Sales teams may not always present this luxury, so reps may simply demand these commissions to cover their bases.
I completely agree with your assessment of sales commissions elsewhere--and I think we've all seen enough of a share of unfair, incompetent management to understand the rationale. That said, I also agree that there is some serious baggage that comes with commission-based compensation and it's worth a look to dump it.
Is this a real-life example or a hypothetical situation? Hard to imagine this to be realistic unless this is one of the top 100 sites in the world.
As a sales engineer, I'm not sure I agree that employee views can be divided into a black-and-white categorization of X vs Y. I'm not lazy, want to avoid work, etc., and yet I still think a $200,000 deal requires more work and yields more profit for the company than a $5,000 deal, and thus I should be rewarded for that additional effort.
Comparing this reward system to coding or some other profit-generating segment of the company only works part of the time. With sales, the increased profits available for reward are immediately clear. With coding, the value-add of a coder's efforts are less clear, so it's up to his or her manager to see the financial impact of that employee and reward accordingly via bonus. Simple example: a friend of mine optimized some javascript, reduced the file size, and this ultimately saved his company over $200,000 a year in bandwidth. This is quite clear, whereas a simple bug fix or new feature is not.