Salary vs. Commission - Impact on Performance

Quote:

Originally Posted by Calvin

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

When a salesperson is condemned to work alone without any support from the company, it's a clear indication that he's working for a moron who doesn't have the brainpower to comprehend the power of working the salesperson as a part of a business development team.

I would do one of 2 things...

1) I would leave.

2) I would click over into broker mode...

I generate leads and close the leads. I negotiate and price the projects. Then when everything is lined up, I send an RFP to the company and 9 competitors. I select one as my subcontractor at competitive rates to do the work with the following conditions...

1. You identify yourself as my subcontractor, and do not hand out your business cards or any of your promotional materials and never talk about your personal business at any time.

2. You will do no promotion for your business at any time.

3. You perform the work as my subcontractor according mutually pre-agreed instructions, and do not agree to any altered, modified, or new conditions with the client. Any such client requests will be passed on to me for decision.

4. You will conduct yourself professionally, observe business ethics and courtesy, and meet the work requirements above. Failure to do so in the opinion of the client or me results in termination of the contract and the cancellation of your payment.

5. The name of the client never enters your database, and you have no right whatsoever to stay in touch with the client to solicit future business. All negotiation takes place between the client and me.

Hope it helps. I know this is hard ball but I have low tolerance level for idiotic employers.

Quote:

Originally Posted by Bald Dog

When a salesperson is condemned to work alone without any support from the company, it's a clear indication that he's working for a moron who doesn't have the brainpower to comprehend the power of working the salesperson as a part of a business development team.

What are your thoughts about those salespeople who work best alone?

Quote:

Originally Posted by Calvin

What are your thoughts about those salespeople who work best alone?

The same as soldiers who say they work best alone. Useless. Even James Bond has a support team. Not to mention Secret Agent Bluebottle from the British comedy, The Goon Show.

Today's solutions are far too complex to be left for one person. Buyers also have multiple people involved in the decision making process.

ere is my reasoning behind the team approach...

Creativity, effectiveness and the quality of our decisions are the function of the number of connections we can make between our brain cells. The more connections we make, the better the decisions we make.

Now, let's say, for the sake of simplicity, you have four brain cells, so you can make maximum six connections. In isolation I can make the same six connections with my four brain cells. But together we can make 28 connections.

Here is a different explanation. I'm an ex farmer, so I love animal examples...

Chimpanzees have the largest brains among animals. They are individual geniuses. But their group IQ is basically idiotic. Baboons, on the other hand, have pretty low individual IQ but very high group IQ. Baboons are a great example of collaboration.

Total number of connections = (Number of brain cells * (Number of brain cells - 1)) / 2

It means the quality of our joint decisions is 366% higher than the decisions either of us can make in isolation. And this is just a team of two.

I believe the era of the lone wolf (as per Glengarry Glen Ross -> http://www.youtube.com/watch?v=TROhlThs9qY) ended in the last millennium. The exception is if we're selling simple commodity items.

Thoughts?

Quote:

Originally Posted by Bald Dog

The same as soldiers who say they work best alone. Useless.

IMO this is too black and white, too rigid. It also appears like "teams" are the "right" way and working as an individual is the "wrong" way.

Quote:

Originally Posted by Bald Dog

Today's solutions are far too complex to be left for one person. Buyers also have multiple people involved in the decision making process.

Some solutions are too complex to be left for one person but what is the exception and what is the rule. Is car sales too complex? Is insurance sales too complex? Is consulting services too complex? Which solutions are too complex?

The potential of multiple people being involved in the decision making process has always been a factor. That hasn't changed.

Quote:

Originally Posted by Calvin

Is car sales too complex? Is insurance sales too complex? Is consulting services too complex? Which solutions are too complex?

I think clients want to know the full picture. The car salesman can show and overall picture and then call the mechanic to explain the technical intricacies of the engine. Then call the detailer to educate the client how to properly clean the car.

I believe in many cases clients regard services as commodities because that's how the selling company treats them. Yes, I think car sales are complex. So is insurance and consulting sales.

Team vs. individual. Maybe my opinion is not even realistic. Starting from the military, I've worked in brilliant teams (as opposed to groups of individuals) over the years. Maybe that's why my personal preference is the team approach.

Quote:

Originally Posted by Bald Dog

I think clients want to know the full picture. The car salesman can show and overall picture and then call the mechanic to explain the technical intricacies of the engine. Then call the detailer to educate the client how to properly clean the car.

My opinion is that general car sales isn't so complex that it is best handled by a team of specialists such as a salesman to facilitate the sale, a mechanic to explain technical intricacies of an engine or a detailer to educate the client on cleaning a car. A little cross-training at the dealership could go a long way in achieving a similar result.

Quote:

Originally Posted by Calvin

My opinion is that general car sales isn't so complex that it is best handled by a team of specialists such as a salesman to facilitate the sale, a mechanic to explain technical intricacies of an engine or a detailer to educate the client on cleaning a car. A little cross-training at the dealership could go a long way in achieving a similar result.

Calvin,

On the ground scale I agree with you. What rebels in me is the general public opinion that regards car salespeople the greatest scumbags on the face of the planet. There must be a reason why most people dread shopping for cars.

And to change this perception, the selling process ought to change. The current process is that of selling a commodity. That's why people haggle on cars.

Why can't car dealerships build a bit of an aura around cars by selling unique driving experiences. This may sound a bit Tom Peters-ish, but I also think it has value. After all, it's not what we sell but how we sell it that counts.

Thoughts?

Before I became a CEO, I worked as a direct salesperson for companies with many different types of compensation plans. I made the most money when I was on straight commission.

When I went into several companies as sales manager or VP, I reworked their sales compensation plans to emphasize incentive pay. Every one of them resulted in dramatic sales increases. Those salespeople who could not keep up with the growth either were put into a non-sales job or left the company.

In my positions of sales manager, my own compensation was based on the total sales volume of the companies.

Two of the companies that I joined had a mixed sales force. About half of the salespeople were on the payroll; the other half were independent manufacturer’s reps. The Reps earned an average of 170% more than the direct salespeople. The Reps had to pay their own expenses, which amounted to about 25% of their total commissions. Therefore, they only netted about 90% more than the average of the direct salespeople.

When I got tired or running big companies, I became a manufacturer’s rep.

Quote:

Originally Posted by Bald Dog

The current process is that of selling a commodity. That's why people haggle on cars.

Most of the passenger cars I see on the road are very similar. Very homogenous. I think that this lack of perceived difference in quality or features is one of the main reasons why people haggle on cars.

Quote:

Originally Posted by Calvin

I think that this lack of perceived difference in quality or features is one of the main reasons why people haggle on cars.

You're dead right. And it's the seller's responsibility to create a buying process (not merely the product) that is drastically different from the competitors' processes. But this takes time, effort and dough, and many companies are not willing to make the initial investment.

So, they keep playing the number's game of selling and subject themselves to the low haggling and objections.

Salary vs. Commission - Impact on Performance

Sales Management Forum