Sales-Management
100% Commission Equals Zero Percent Control
The temptation to use straight (100%) commission plans never goes away: "Let's put our salespeople on 100 percent commission. Then, if they don't perform, we're not out any money." For small, start-up organizations, the lure is irresistible, especially when money is tight and the company or the products they sell have no track record in the market.
Straight commission appeals to salespeople because of the freedom that comes with it. Because they receive no salary, these salespeople are unwilling to allow management to prescribe how they do their work. That includes hours kept, effort made, methods used, or product lines sold. The only real rules they must abide by are ethical. When salespeople are willing to give up salary, management must be willing to give up control.
For someone new to sales, finding a straight commission position may be a way to establish themselves as a salesperson. For a proven, effective salesperson, 100 percent commission may be the road to making loads of money by making lots of sales for their company. Unfortunately, most small companies with straight commission plans hope for the latter and wind up with the former. These inexperienced, undisciplined, babes-in-the-woods carry a high likelihood of failure, costing their companies untold sales opportunities during the "experiment".
If you choose to use a 100 percent commission plan, you must find salespeople who bring their own motivation to work every day. Each morning, the salesperson must have their own target to shoot for and a solid plan to get there. New sales people may have the enthusiasm, but it's unlikely that they have a plan that works. Conversely, many experienced salespeople know how to create a plan and go through the motions, but are no long turned on by the thrill of the hunt. They may be content with a level of sales performance that allows them to satisfy their lifestyle requirements, but underperforms the sales goals set by management.
The net is there's no way a company cannot invest resources in their sales team. Either you pay a salary and then plan on actively managing and developing your salespeople for success. Or, you pay straight commission, save the salary, then pay big dollars to replace unproductive personnel while you forfeit sales opportunities lost by ineffective sales people.
When you shift risk to salespeople by adopting a straight commission plan, you may in reality be risking your business. Think hard about what's really important to you when you design your sales compensation plan, and control your urge to use 100 percent commission.
? 2005 Paul Johnson. All rights reserved.
Note: This article is NOT available for reprint without advance written permission.
Paul Johnson of Panache and Systems LLC consults and speaks on business strategy for systematically boosting sales performance using Shortcuts to Yes?. Check out more salesforce development tips at http://panache-yes.com/tips.html. Call Paul direct in Atlanta, Georgia, USA at (770) 271-7719.
Paul Johnson
Similar articles
3 Ways to Increase Your Sales
Last week I got a call from Jose, who was looking for help improving his ads. He'd been running the same ad in four local papers for two months and only gotten one response. Read more →6 Danger Signs You May Be Headed to Micro-Management
1) Do you monitor and manage tasks or do you identify and train to essential competencies?Do you want to know the big difference between due diligence and a core competency? Read more →A Fresh Approach To Managing Your Most Important Accounts
Most companies are looking for ways to manage their most important business relationships more effectively and more efficiently. It is not easy to do and it is not always enjoyable to do, but when a major account strategy works well it is extremely satisfying. Read more →Advice for First-time Exhibitors: 10 Costly Mistakes to Avoid Before Exhibiting At a Trade Show
You've just decided to attend your first consumer trade show as an exhibitor. You have money in your marketing budget to spend on booth space, but the hardest decision is deciding which show will give you the most bang for your buck. Read more →Aphorism
Things should be as simple as possible, but no simpler.
Albert Einstein