Much has been said about the fact that salespeople are mostly commission based.
Have we perhaps forced salespeople to be commission based because this is seen as a hit and run game, whereby only a small percentage of people reach their targets consistantly.
What is the turnover within companies because salespeople cannot "survive" until such time that their commission is enough to pay for the bills? What do you think is the on-boarding costs of salespeople within businesses, and how much is lost due to them not lasting? In many companies it would probably make financial sense to have only one field salesperson that meets with 3 new clients every day, instead of five that meet with one client per day. Many salespeople have this romantic notion that this is the kind of work where you have freedom, can come and go as you want, (your own boss) and that they could retire at 40. The reality is that it takes much longer to build up a client base or at least until such time that sales flow in regularly. (90 percent can never afford to retire)
Why then do most salespeople hate a commission structure, and does performance pay in fact motivate them, or discourage them from staying in sales?
It has been proven that salespeople, contrary to popular believe, don’t live in a parallel universe. They are part of the same dysfunctional reality that causes the rest of an organisation so much pain.
Imagine an accountant’s remuneration being commission based? Or what about a technician at the firm? So how come they do their jobs and we don’t feel the need to employ them on a commission basis?
In his excellent best seller, Daniel Pink presents a powerful case against performance pay. His conclusion – backed by many experiments from social science – is external rewards retard the performance of knowledge workers and have a positive effect only in situations in which workers perform mindless, repetitive tasks.
In other words, if your team members are responsible for activities more complex than licking stamps, the work itself is the reward. As long as employers take the worry of financial strain off the table, so that employees can focus on the work at hand and not stress because of month-end bills, performance pay does not motivate.
Consider this: In most environments the volume of sales appointments (the one thing salespeople struggle with the most) has a far greater influence on sales output than the qualitative performance of the salesperson. In most environments, salespeople generate their own opportunities as result of mindless and repetitive prospecting activities that take up a very large chuck of their days.
With this in mind, commission may make sense, not because this motivates salespeople to sell, but to motivate them to prospect and do admin. Once again most businesses feel that commission is the safest method, because we don’t really trust that sales is a system that works! Let’s get back to what salespeople are supposed to do then - is it not to sell???
When we expect salespeople to sell our services, does that not mean that they should meet with potential clients as regularly as possible. So why do most businesses expect them to do administration, prospecting, implementation, customer retention and all the other tasks that make up around 90% of their days? Surely our customer relation’s officers don’t work on a commission basis.
We have created a very dysfunctional environment and hear business executives, sales managers and all other departments complain about issues in the work place.
What about complaints from salespeople? I believe they have a their fair share to complain about:
- They hate clerical, admin and customer service work.
- They don’t enjoy spending their evenings in hotel rooms feeding data into CRM systems.
- They definitely don’t enjoy writing expense reports or proposals.
- They resent conflict over allocations of commission every month.
- They surely don’t like having to advise clients that their promise might not be met.
- It’s impossible to like the constant uncertainty over production performance and underperformance.
- I also don’t think they enjoy the constant stresses in their relationship with production, customer services, accounting, technical and all the other departments.
What’s the point?
The point is that salespeople rarely get the opportunity to interact with prospects and sell. Most of their days are filled with things they either hate or know nothing about. For those of you that say "I did all of that back in the day and sold plenty", keep in mind that this is not back then and things have changed drastically.
It’s time we recognise this and look at the future of our sales structures. Serious consideration is required and executives need to take note. There are much more effective ways in which we can ensure success for all within the business structures. If we were to take a step back, we would notice that commission based remuneration is not the always answer.
Pay people what they are worth and maybe a little extra! Ensure that compensation is no longer a regular topic of conversation and then insist that they perform the activities for your company to achieve its objectives.
From management's perspective the fundamental difference between performance pay and salaries are: With performance pay, we make optimal performance optional, and then attempt to exert control through a compensation plan that underlines salespeople's autonomy with every paycheque. And with salaries, we take the discussion of money off the table. Salespeople willingly subordinate to a central schedule, and they perform necessary activities because they are asked to do and not because those activities are congruent with both job descriptions and reasonable interests of the business.
Re-engineer your teams and their specific roles. Look at creating a dedicated outbound team (much more important these days than field salespeople) that understands what it takes to generate and qualify sales leads in this environment. This is an “office job” for someone that is properly trained in the art. Its also not left to a junior, but rather someone with a business mind that really understand your services
Ensure that your field salespeople spend 100 percent of their time facing new clients. They are an expensive and rare commodity and you would be surprised what happens when you have a well-oiled machine, whereby each member is responsible for specific tasks that drive more actual sales meetings for your experienced salespeople.
When looking at the graph above, how can we expect our salespeople to perform optimally if they are spending most of their time "not selling"
This would also take away the need for us to control salaries by means of commission. When salespeople face a constant flow of qualified meetings, sales will follow and there is no reason we couldn't remunerate them the same as for any other team member in a company.
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Over the past 20 years, Riaan has been working with leading Sales Organisations, Sales Managers and select Individuals who want to improve sales performance, design and implement sales processes and cultures that leads to increased revenue.
Since 1985, Riaan has been in Corporate | B2B | High-level sales and led teams to maximise performance. He provides strategic oversight and serves as executive coach and advisor to clients ranging from small, rapidly growing start-ups to well-established, large corporations.
His experience has allowes him to work with organisations and executives within entities such as Old Mutual, Sanlam, the Telecoms Industry, Siemens, Capgemini, Accenture, BWI in Hong Kong and many others, to help them improve sales performance.