Salary vs. Commission - Impact on Performance

Thomas

So the whole world is wrong and you are right?

That analogy doesn't even make sense.

Bald Dog

It's not about being right or wrong. There are different objectives here. Profitable clinic vs. profitable individuals.

But what I've also found is that profitable clinics also create wealthy professionals.

In the last example I tried to illustrate organs and other bots and bobs work together as a team.

It's just a difference in perspective. Some people trace success back to the individual who "closed" the deal, and some others attribute success to the team that worked on the case. And if I want all my people to align behind the clinic's vision and strategy, I'd better eliminate individualism.

RainToday has just published a great article on the topic...http://www.raintoday.com/pages/2481_...12784&ID=28255

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Thomas

That article didn't say to pay everyone the same.

If everyone on the team should be paid the same then the sales people should be paid the same as the owners. How does that make sense?

Bald Dog

Not exactly. I only talks about other alternatives.

Essentially yes. Salespeople contribute to the firm's success just as the executives do. They just have different job descriptions. I would say the owner, for the risk she's taking for starting, running the business and the ultimate responsibilities, she has the right for double-dipping. But the competition vanishes among other people.

I've implemented this equal salary thing at over two dozens firms, and all of the sudden all the people felt responsible for the firm's success.

So, I don't say my approach is better than any other approach, but these firms have become more profitable as a result, and the people enjoy their work more than ever. So, if I compare this to the normal 43% annual attrition of salespeople, then I like what I've seen so far.

BossMan

What other solutions do you see for obtaining this type of responsibility from employees?

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"People will not listen to the solution until they understand and believe the problem."

Thomas

Are there other ways Bald Dog?

Bald Dog

Can we really obtain a certain responsibility from people. They must agree to provide it.

I believe the key is to create a culture of responsibility. That's the owner's job. And a certain culture will attract certain employees regardless of money. this is why the US Army doesn't have recruitment problems although the pay is not so great. people want to belong to a something that is in alignment with their values.

In the 8th Habit Stephen Covey writes that employees work at 6 different levels...

1. Rebelling and quitting
2. Malicious obedience
3. Willing compliance
4. Cheerful co-operation
5. Heartfelt commitment
6. Creative excitement

Employees in most companies operate at levels of 1-3. A handful has level 4. Level 5 is almost exclusively reserved for the military, and level 6 is basically self-employment when you do what you love.

There is an interesting research finding on this baby at... http://www.varjan.com/articles/0701-...neration.shtml
under the heading of "What a Good Environment Can Do for Your Sales."

And I also believe we create the culture through our behaviour. I think the phrase "Practise what you perch is wrong." It more like "Preach what you practise." Practising comes first, and then we can expect others to follow. And most people simply can't pull this off.

Justyn

I think to attract and retain the best talent there must be an individual perfromance based aspect of the comp plan. Allowing the salesman to envision the direct impact on thier bank account in each sale is powerful stuff. And please don't pay me based on what other people do (team), unless I manage that team.

In any complex sale I think there also MUST be a salary component. During the valley's you don't want desperate salespeople. Straight commission seems intuitively more motivating, but the effects of a slump can mean a huge dip in effectiveness. I would not be at all surprised if the average tenure for salespeople in straight commission jobs is noticeably lower than other models.

For what it's worth, the last time I was recruited I ended up going with a company that paid about 1/2 the base salary of the competition because of a very lucrative back end. I think real performers will not shy away from a low base salary if the back end is right. Just give them enough salary to pay the taxes on the big checks!

Justyn

Houston

Bullseye Justyn!

Calvin

How would this apply to a sales position like a manufacturers rep where the rep works alone?