Salespeople are typically paid on commission. They may get a basic salary as well, but for the most part it’s the commission that buys them the big houses and fast cars – or doesn’t, depending how the year is going.
After a recent positive experience with a sales rep who confided he was not on commission, I started to wonder about how commission affects sales performance. Is it the motivating factor that it is believed to be? Is it fair? Is it relevant to the next generation of salespeople coming up through the ranks?
What’s the salary for?
One of the big downsides of commission that I’ve noted in my 25+ years in sales is that – as a system – it’s often abused by employers. Salespeople will be offered a very low basic wage with the assurance that they can achieve fat pay packets (good old ‘OTE’) simply by doing the job well.
The reality is that the sky is rarely the limit with these kinds of jobs – it’s a lot lower than that. And until you actually start trying to sell the product, you have no idea how achievable the OTE is. In my opinion, your basic wage should reflect your skills and experience. It doesn’t have to be substantial but it should be sufficient to compensate for the demands of the job.
The flip side of that coin
The other problem with a low basic wage is that salespeople can feel like they are being paid just to show up – they put the work in for commission, which is earned. But what about the tasks they need to complete that aren’t obviously tied to this commission? And what’s the impact on their attitude to the company and to their colleagues in other departments who aren’t paid commission?
I once heard of an argument that tore a small company in two and took literally years to repair. What started it? A salesperson who told a person in another department ‘I pay your wages’. Was commission to blame in this instance? I can’t help but feel it contributed to the feelings of superiority in one department and resentment in another.
The problem with no commission
So what’s the solution? Get rid of commission and offer a good wage instead? There are definitely some benefits to this. For a start, if you get the company culture right, this could encourage salespeople to sell to customer needs rather than to always try and upsell, regardless of what the customer wants. Such a strategy would surely lead to more happy customers? That was certainly my experience with the salesperson that started me down this wormhole.
On the other hand, as this article from Guru points out, if all the other companies are offering their salespeople commission, are you really going to attract the best talent with a fixed income? And if you don’t have the right people, whatever strategy you use is unlikely to succeed.
The problems commission can cause
As a salesperson, if your basic wage is low or non-existent, commission is your lifeline. Which is why commission can sometimes lead to bad sales practices. Salespeople promise the moon on a stick to push a deal through and then let customers down once the cheque has cleared. This kind of bad sales behavior is deeply frustrating because it gives the rest of us a bad name! It doesn’t build relationships and trust. It doesn’t help the company in the long-term. But it’s what can happen when a company pushes salespeople to sell, sell, sell, regardless of the cost.
Commission is a big motivator – until it’s not
So as you can see, I’ve gone backwards and forwards on this one. After much toing and froing, I came to the conclusion that commission is still a necessary component of successful sales teams – with provisos.
- Salaries should be fair.
- Targets should be attainable.
- Your commission structures should be appropriate for your business – it’s not a one size fits all thing.
- Salespeople must have a passion for sales. Those that are only in it for the money probably won’t make as much of it as those who really love the job.
What do you think? Commission? No commission? Commission for everyone? Or something else? Find me on Twitter @joshdhaliwal and tell me what you think!