Home > Personal Selling > The all too common disparity of pay in sales.

The all too common disparity of pay in sales.

If you are a true sales professional you may not have ever thought of this before. That is because you make more from commissions than a base salary, a lot more. But this is a subject that is very interesting indeed.

Let’s take a slice of life example from a large consulting firm - who shall be nameless - that relies heavily on sales to generate new business. The background;

Telephone prospectors and sales people receive a salary plus commission. For this example because this actually happened let's look at their telephone prospectors who earn $25,000 a year plus commissions (the top earner ever received $180,000+ in a single year and is related to me - that is how I know this).

Roll the camera forward, they are having a quarterly meeting in 1998, I am at this meeting - the only one I ever attended - and the V.P . of Sales is speaking. He mentions that one of the telephone prospectors is getting 12 meetings a week with the ultimate decision maker at new prospective clients, ending his comments by saying directly; “Keep it up Peter!’

Peter says out loud; “Don’t worry, I need the money!” This causes some laughter but, more importantly for this story, it also let’s the other prospectors know where he is sitting, which they may not have known otherwise because everyone in this firm except a small few work from home.

Sitting in front of Peter is another ‘prospector’ who has been consistently getting a quarter of that production, he turns to Peter during a meeting lull and says quietly (but not too quietly for me to miss hearing);

“Wow, I thought 3 a week was excellent!”

Now, never mind the obvious discussion of equality in terms of ability and training, the kinds of things normally discussed at this website, let’s open a discussion about equity and disparity of pay.

The logic that top producers may sometimes get snowed into thinking is; “As a top producer I will earn way more in commissions” but you have to reconsider that as soon as some individual thinking is applied.

You see, at this company and most companies, the top producer earns the same commission rate as the mediocre producer, if I may use this term without being intentionally degrading. Call it 5% for sake of argument. In other words, 5% of billings is paid as a bonus to the person setting the meeting once the sales person turns them into a client.

If that company had to hire 4 people to produce 12 kept meetings a week - if three was the norm - to equal the man who does 12, they would spend a base salary of $100,000 per year. And they would still payout 5% … the person producing 12 a week was earning more with the 5% on average from 4 times as many sold clients but they were not earning more than 5%. In affect, this company saved $75,000/year by having this super producing telephone prospector as apposed to 4 mediocre producers!

This is an obvious disparity of pay. It exists for sales people and telephone prospectors, and it points out an error in the compensation of sales people. That top producer should have received $100,000 plus 5%, if the company was to be fair.

Now you know why consultants are born. They realize they are working harder and getting the same pay, so they take on clients, run two, three or four at a time, then they increase their per hour billings or base pay to what is fair.

I wish to put forward a theory from a sales pros point of view (albeit one who is already left the world of being an employee), which is;

Companies make tremendous returns on super producers. It is us who pays for the overhead of the mediocre and poor producers, subsidizing the company’s costs of trying out bodies to see who will work out.

Comments? - by Gold Calling
Couldn't the top performers negotiate a different pay structure? - by Thomas
What happens when you make more than the CEO?

You end up negotiating alright - down! - by Gold Calling
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