In my line of work I often get asked to look at the remuneration packages of my clients’ sales staff to see how I can craft something that is good for both the company and the employee.
If you’re in the sales game, you know that there are generally four remuneration models:
- Commission only
- Small basic and bigger percentage commission
- Bigger basic and smaller percentage commission
- Salary only
If you’re a sales manager and reading this piece you’ll probably think I’m a heretic when you hear what I have to say.
I think the best remuneration model for sales people is … salary only. A bigger basic with a smaller percentage commission would be my second choice but not ideal).
There are 3 main reasons why I think the commission model is flawed:
- It doesn’t work
- It enslaves sales people
- It produces predatory sales people
1. It doesn’t work
Every bit of research (and from personal experience helping more than 10 sales teams) indicates that most of your sales team is underperforming. The Chally Group puts a number on it: 80% of your sales team is only achieving 42% of its target.
Clearly, the thought of a big commission cheque at the end every month is not motivating sales people to close more deals. If this were the case, 100% of your sales force would be hitting target, wouldn’t it?
All it does is create miserable sales people. Imagine going into your weekly sales meeting and being a bottom feeder on the leader board? And, watching praise get heaped on the producers. That can’t be fun. It becomes a competitive environment where jealously, bitterness and misery stew (for the losers) and arrogance and entitlement (for the leaders). This does not bode well if you want a collaborative culture or a sustainable balance sheet.
2. It enslaves sales people
As a sales person, when you want something from somebody else (a prospect), that person’s ability to withhold a sale from you makes them strong and you weak. So, you’re always in an unequal position.
A ‘servant to a master’ if you like. When you need commission you’ll sell your soul and promise anything to get the deal. You’ll hang onto any crumb that the prospect throws your way.
You’ll discount. You’ll give away margin. You’ll do whatever it takes. And, you’ll find it difficult to look at yourself in the mirror because nobody likes to be a slave.
Try looking at your family with any kind of integrity after you’ve capitulated on just about everything you believe in. Not fun. I want to hang out in a job where I’m respected, where I’m treated as a trusted partner and elevated to expert status. Don’t you?
3. It produces predatory sales people
In an ideal world we should do what’s in our customer’s interest, shouldn’t we? They need to get the best solution at the best price if we are to fulfil that mandate.
But, when you need the commission to sustain your lifestyle, that’s when things go south. Because this is when you do things that you shouldn’t do that are totally in your self interest. This is when you promise things you can never deliver on, when you lie, cheat and steal. Because the prospect is a means to an end … commission.
Everyone loses – the prospect doesn’t quite get what he or she wants and you sell your soul and become a selfish user. You become a predator.
Think about commission-only sales people like financial advisors, short term insurance telesales staff and the like. How can you actually 100% trust them to give you the right advice? They’re in it for the commission and they’ll say and do pretty much whatever it takes to get a sale. The same goes for those that earn a barely liveable basic with commission. I’m sure that for some commission-only sales people it’s a callingbut for most it is a commission.
So, what’s to be done?
The smart employee engagement people say that 67 percent or so of employees are actively disengaged from their work. They’d rather be anywhere but in your company. They’d rather be taking instruction from anybody else except you. That’s got to hurt you as a leader.
I would imagine that in many of these cases, keeping your employees engaged and motivated, has very little to do with the remuneration package. If a paycheque was the sole motivator, everyone would hit 100% of the targets you set for them.
As you know, in South Africa, our policemen and women are paid shocking salaries for what they have to do. Some of them who don’t see their work as a calling go to the dark side of bribery, corruption and graft. But do you think if we double or tripled their salaries we’d get a better police force? I don’t think so. All that will happen is that their lifestyle and their expenses will go up. And, then we are back to square one.
Let me ask you this question. Would you take a bullet for a perfect stranger for R5000 per month? My answer would be “no”. Would you take a bullet for a perfect stranger for R1-million a month? My answer would be “no”.
Would you give up your life for your closest family members? My answer, as yours would be is surely “in a heartbeat”. So, the motivation surely doesn’t come from a paycheque but something bigger than yourself.
Your job as a sales leader is to get your sales people to work for something bigger than a paycheque. Your job is to get them to follow you to hell and back.
Here’s some ideas:
- Pay your sales people a proper salary, something that covers their security needs and a little more.
- If you want to incentivise with some kind of profit share, that’s great. But incentivise the whole organisation because everyone has a hand in everyone else’s success. So, at the end of the year, when targets have been achieved make sure that from the lady that serves the tea, the janitor that wipes up after you to the CEO gets the fruit of everyone’s labour.
- Turn your sales people into corporate evangelists. Their job is to see as many prospects as possible and share the ‘good news’ with them. They can do it with abandon, joy, authenticity and honesty (in the best interest of the prospect) because it has become a calling. They’re not desperate to make a buck because that piece has been covered.
- Measure them on activity, not only results. Set prospecting (over the telephone) goals, meeting goals, proposal goals and closing goals.
- Hold them to account. If they’re not following the process and not doing the work you hired them for, fire them. On a bigger salary, you really can’t afford to carry them. They need to come to the party as well.
- There’ll always be exceptions. There are those miserable, despicable human beings that will try and game the system and do whatever it takes to get ahead at the detriment of the rest of your tribe. If you have a solid culture that puts each other’s needs first, you’ll quickly weed out these rotten apples and turf them to the pavement. They don’t deserve to be in your tribe.
- Step up as a leader. Become the leader you were meant to be. I’m sure that you get that hiding behind your Excel spreadsheet and studying the numbers is never going to turn you into a leader. Your job is to lead, inspire, coach and set the culture. Your staff look to you. Give them something worthwhile to look at and to be proud of.
- Ask yourself now, “Will my staff go the extra mile for me?” If the answer is “no”, then you have some work to do, don’t you?
- Train your people silly. Invest in their potential.
- Catch them doing things right, not wrong. Heap praise on them.
- Stop using your sales meetings to “go through the numbers”. Sales meetings should be used as learning and motivation opportunities. They should be opportunities to collaborate and not compete.
- Stop using sales meetings to beat up on your staff. Just because your life sucks, it doesn’t mean theirs has to.
- Discuss sales figures and targets in private. This should be done in your weekly coaching session with each one under your care. You do coach every week, right? What is said and agreed upon behind closed doors, stays behind closed doors. What your agreements, goals and aspirations are for an individual is not the business of the other sales people. It is a covenant between you and the individual.
- Make your sales people proud to work for your company. Get the culture right. And, if you’ve read anything by me, you’ll know my take on it … You’re not here for yourself, you’re here to serve the other. Your job as a servant of the company is to set each and every one of your compadres up for success. Their job is to set you up for success. Love your team and watch them love you back and watch the sales roll in.
- Spend at least a day a month driving along with each of your sales people. This is an opportunity for coaching, learning and connecting.
- Coach each individual in private.
- Reprimand your sales people in private and praise them in public.
Go and read something worthwhile. If you want to know how to hold you and your staff accountable, read The Warrior Ethos by Steven Pressfield. If you want to learn how to lead. Go and read about Alexander the Great and how the Israeli army does it. If you want to inspire a culture of care and growth, go to Etsko Schuitema’s work. And, if you want to stop the water cooler talk check out Stef du Plessis and Steve Simpson’s groundbreaking (Unwritten Ground Rules) work on culture.