Why Should Selling Be Optional?

Posted by: Rod Kurtz on April 20, 2009

At a recent conference, I wasn’t surprised by the reaction of workshop delegates when they figured out that we recommend eliminating commissions and paying salespeople salaries.

I didn’t present this position explicitly—after all, it’s a secondary consideration, not the primary that everyone assumes it to be. But our position was inferred and it didn’t take long for delegates to put two and two together. So when one delegate eventually summoned up the courage to have me confirm that this is, in fact, the way we feel, the room descended into pandemonium.

Before thinking this notion is insane, answer this question: Does it make more sense for sales to be performed by autonomous agents or by team members? How you compensate your salespeople is a natural consequence of your answer to this question.

In line with the point above, you cannot and should not convert existing salespeople in a traditional sales environment from commission to salary and expect an improvement in performance. You must first—if you deem it appropriate—change your basis of engagement with your salesperson. They must willingly give up their autonomy and become a part of a tightly integrated team.

Also, you must replace your laissez-fair approach to management with a formal management structure—one that gives you control over the activities performed by salespeople and visibility of the relationship between those activities and the results they generate.

Lastly, a bit of a reality check. The truth is, if you put a salesperson on commission, you have given that person permission not to make sales. In other words, you’re communicating to that person that the only consequence of producing less than the optimal output is simply an incremental reduction in total take-home pay.

Why would you do this? Why would you make it optional for salespeople to sell? What is the cost to your organization of those prospects that aren’t visited and those contracts that aren’t signed simply because your salesperson is comfortable to earn, say, $100,000 a year as opposed to $115,000?

If you had a plumber on salary, you would not make it optional for this person to fix leaking taps. It would be an expectation. If he chose not to, he would be risking his entire salary—not just the potential to earn an extra dollar or two.

If sales are important to your organization, why would it make sense to treat your salesperson any differently?

Performance should not be optional.

Justin Roff Marsh
President
Ballistix
Chicago

Reader Comments

Liz Cobb, CEO Makana Solutions

April 22, 2009 12:16 PM

A properly designed sales incentive plan does not invite a salesperson to consider selling as "optional". Rather it motivates them to sell more. I would join the audience in the uproar. Good plans don't have enough base salary to enable a salesperson to be "comfortable" until they are very close to quota.

For more on sales compensation best practices, please visit our website. www.makanasolutions.com

Bridget DiCello

April 22, 2009 12:58 PM

Amen - great article. I agree that salespeople need to be managed and that leaving the level of performance up to their desire to achieve a certain level of commission may work for some very driven salespeople but not for the group as a whole. The fact is that most managers/owners would prefer not to manage the salesperson or don't know how and figure the commission will manage the person instead. I do often end up recommending a combination of the two to my clients, with salary being a large part, but some commission to give them ability to make even more than the company's goals if they so desire.

Bridget DiCello

April 22, 2009 12:58 PM

Amen - great article. I agree that salespeople need to be managed and that leaving the level of performance up to their desire to achieve a certain level of commission may work for some very driven salespeople but not for the group as a whole. The fact is that most managers/owners would prefer not to manage the salesperson or don't know how and figure the commission will manage the person instead. I do often end up recommending a combination of the two to my clients, with salary being a large part, but some commission to give them ability to make even more than the company's goals if they so desire.

Tom O'Brien

April 22, 2009 1:01 PM

Anybody who has sales people living off of base pay for more than 1 year has a serious management problem.

Successful organizations I have worked for the best sales people made from 4 to 10 times base pay. Rarely the same person year after year.

This BIG sales success enabled companies to go public and get bought by F500 companies.

I'm talking about sales deals that change the value of the enterprise.

What you want is highly leveraged sales people who need every dollar they can get!

TO'B

Jon Beckmon

April 22, 2009 6:46 PM

To Justin Marsh,

There is however a huge counterargument to your argument of why
they shouldn't be on commission and on Salary instead. Everybody at the top
of their organizations is on Commission.
If all your plumbers broke off and went independent they wouldn't get paid at all unless they fixed things for people. That is straight commission. If they don't work there is no salary. And if they earn enough and are kept really busy they also don't have to take on extra jobs for people.

I'm the president of my company (owner) and if items don't get sold there is no revenue and I don't get paid.

If doctors and Lawyers don't have clients that pay them then obviously
they won't get paid. Commission.

When it boils right down to it everything is really paid on commission. And if you don't perform in your job you can be laid off from any position anywhere. If corporations keep laying people off eventually there will be only the guys at the top to get the "ACTUAL" job done of selling and making whatever it is they do...And being the accountant, the lawyer and a true jack of all trades.

And the utmost of independence will ensue. To survive you better be a farmer or do something for someone to get food (Glean the field maybe...? Oopps that's paid on commission. If you don't Glean and Glean enough you don't eat!).

Jon Beckmon
Owner
Beckmon's Gaming Paradise

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