Salary vs. Commission - Impact on Performance

Does pay structure have an impact on sales performance? Do you believe a salesperson working on straight commission is more likely to outperform a counterpart working on straight salary?

I think so. I've seen guys work at one company on salary who had to leave because they werent' selling anything and then took a job at a competitor who paid commission and they did much better because they had to get out and sell or they didn't get squat.

Originally Posted by SpeedRacer Do you believe a salesperson working on straight commission is more likely to outperform a counterpart working on straight salary?

I can believe that the salesperson who chooses straight commission over a salaried position is more likely to outperform the salesperson who chooses the opposite.

Originally Posted by AZBroker I can believe that the salesperson who chooses straight commission over a salaried position is more likely to outperform the salesperson who chooses the opposite.

Is that because they are more "focused" on getting results and are in a win : lose situation?

There is one factor that has continually stopped me going down the pure commission route in my career and that is the risk that the company you are selling for fails to deliver the product or service correctly and you dont get paid. In the technology business, there are always factors that can delay or even derail a sale completely that are out of your control as a salesperson, therefore we always work on a mixture of fee + commission.

Daewoo tried to work on salary only with no commssion in the UK - the result? They got much lower sales and were eventually bought by GM...lesson learned - sales people NEED commission!

In my experience what works best is base pay and bonus. Unless you sell commodities, selling is a complex issue nowadays it's hard to peg sales success on one single person. Especially not in B2B.

The commission structure alienates the sales force from the rest of the company. They no longer work for the company but for themselves, and by competing with each other. Loyalty is low and the only motivation is to sell so they make more money.

And what has the commission structure achieved over the years? After politicians, selling is the most disreputable profession and salespeople are some of the least trusted and respected people. QED: The general public hates them and does it's best to avoid them.

These two articles may be worth reading.

http://www.varjan.com/articles/sales...-dilemma.shtml

http://www.varjan.com/articles/conde...missions.shtml

And even a large percentage of commissioned salespeople admit that they would never buy anything from the kind of salespeople they themselves are.

A survey by Sales and Marketing Management Magazine has found...

• 49% say their professions contributed to marital problem
• 44% say their professions contributed to for their failed relationships with colleagues and friends
• 18% say their professions preventing them from finding a spouse
• 72% say their professions prevent them from exercising.
• 69% say their professions undermined their health problems, like weight gain.

Cheers

Tom

Originally Posted by Bald Dog And what has the commission structure achieved over the years? After politicians, selling is the most disreputable profession and salespeople are some of the least trusted and respected people. QED: The general public hates them and does it's best to avoid them.

You want to pin that on commission structure? That's reaching IMO.

Originally Posted by Jolly Roger You want to pin that on commission structure?

Partially yes.

Originally Posted by Bald Dog Partially yes.

Would you care to elaborate?

Originally Posted by Jolly Roger Would you care to elaborate?

Using a sports example, I wouldn't want to play in a soccer team where members are individually compensated based on how many goals they score.

Or using an example from my military past, I wouldn't want to lead a team where members are individually compensated based on how many enemy soldiers they shoot. Imagine, the radio operator (a vital function) gets nothing.

But there is an easy solution. The radio operator kills all his team mates and then can claim the glory and the reward all for himself.

What many companies don't realise that the commission structure creates fierce internal competition. You can't expect collaboration (teamwork) but reward competition. Top notch moron sales managers even organise sales competitions.

In today's world, selling involves multiple people both on the buying and selling sides. Rewarding one person for it is plain short-sighted.

Thoughts?

Tom how would you suggest a car dealership pay their salespeople? Would you suggest a base salary plus bonus based on individual performance? How about team performance? Also, do you see any inherent problems with team compensation?