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Value Creation Blog

Should You Pay Your Salespeople Commissions?

Posted by Josh Patrick

salesteamI’ve recently been involved with helping a company work through a variable compensation plan.  One of the sticking points with the plan was what to do with the salespeople in the company. 

They had been paid a commission for years.  We were struggling with whether paying a commission served the company, the salespeople, and the customers well. 

After much debate we decided that paying salespeople a sales commission didn’t make much sense.

In fact, after a little soul searching and reflection I’ve come to the conclusion that in most instances paying a sales person a separate sales commission makes little sense.  I find most salespeople don’t work by themselves; they work with a “team” to produce sales results.

Here are a few examples of traditional individual sales jobs that probably are traditionally paid individual commissions:

  • Complicated life insurance sales.  You buy a life insurance policy from a sales agent.  Behind that sales agent is often an advanced sales attorney who helps design the policy, an underwriter who helps get the policy issued, and a new customer person who manages the sales process.  Yes, the salesperson initiates the sale, but it wouldn’t happen without help from others on their team.
  • An investment manager When you sign up to have your money managed by someone there are those behind the scene that makes the investment possible.  There is a new account person who makes sure the paperwork is properly filed.  There is an investment wholesaler who provides technical assistant to the investment advisor.  There is usually an internal wholesaler who help provide sales literature and information to the investment advisor.
  • A car salesperson.  In this instance there is the sales manager who helps make the sale.  There is a finance person who helps get the car financed.  There is the lot person who gets the car ready for delivery.  There is the administrative person who makes sure all of the paperwork is in order.

In each instance there are others who help make the sale.  In some instances those people are also incented when a sale is made.  In other cases, they are on salary and are just expected to help.  Either way, paying individual sales people commissions for what they sell promotes silo behavior instead of team behavior.

If you’re interested in having your company provide integrated service to your customers you might want to re-think how you compensate the people who create sales in your company.  You might find that under most instances there is more than just the salesperson who is responsible for the sale happening.  There are often people who are “behind the scenes” that played a crucial role in making the sale possible.

Instead, if you thought about your sales process as one that is integrated you might get a different result that ends up with happier customers.  If we had a team approach to selling at a car dealer we might enjoy the process of buying a car more.  We might not feel the incredible pressure from the individual salesperson.

I believe that paying salespeople on commission is the lazy way out.  We have a belief in our country that if we pay a commission people will work harder.  My belief is that if we set standards and manage to those standards, we have better results.

Let’s face it, sales is a number’s game.  If you manager your sales group to make a certain amount of the right type of calls and have a system for them to follow, you’ll likely have a certain amount of success.  They key is managing your sales team to a process.  Most companies I see don’t have a well-defined process.  This is a place where I think you could make huge advances in your company.

I suggest that you think about your sales process and whether a team approach might work better than the traditional lone ranger approach you might be using.  If you think about what you can change, your customers just might thank you for it.

Part of helping your sales people be effective is developing a great niche in your company.  We have a quiz on where you land on the nicheaholic scale.  If you’re interested in taking our quiz (and you should), please click on the button below.


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Topics: business coaching, value creation, niche management, niche

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