FACE IT – your sales staff are the backbone of your company. Without the revenue they generate there would be no need for support staff or more importantly with the efforts of your sales staff there is no company! Despite this fact many company’s take their sales staff for granted or hold them in very low regard.
It has been said that a good sales person is worth their weight in gold. A great sales person is worth their weight in gold bonds. Make sure they are paid when they are supposed to be paid and in the amount they are supposed to be paid. There can nor should there be any deviation from this rule.
The question now becomes as to how to compensate sales people. They are either paid a draw vs commission, straight commission or salary plus commission. Each option has drawbacks but there are definite advantages to each.
The draw vs commission option works well on both sides (aside from the extra bookkeeping that is involved) as it gives the sales person the upfront money so many need and want while giving the employer a method whereby the money they lay out is paid back via commissions earned. If the draw starts to far exceed expected future commissions the draw is often cut or the sales person is let go. This is a very fair exchange.
Straight commission is the compensation package most preferred by many sales volume driven organizations such as Life Insurance Brokers, Life Insurance Carriers, Stock Brokerage Firms and last but by no means least is Mortgage Bankers. Working in this manner allows for a plethora of “six figure incomes.” The problem comes in if the sales person hits a dead period or the sales cycle is taking too long due to back office delays. With this comes a feeling of disconnect from the organization they are working for. Since they only get to “eat what they kill” loyalty to their employer can wane.
Salary plus commission is by far the most attractive compensation structure for a sales person. They have the security of knowing they will get a salary plus have the opportunity to earn even more money by making sales. Many sales managers are skittish about this plan as they feel the sales person will get too comfortable knowing he is getting a salary and not push to generate revenue. This situation has happened frequently enough to produce the reservations about this arrangement. A simple solution is to offer a salary that can cover the sales persons expenses but not enough so that he will become complacent.
Going back to the issue of when to pay your sales staff it cannot be stressed enough that as soon as the revenue generated by the sales person has cleared your bank the sales person should be paid. With the understanding that there are pay periods that have to be managed and alike it is not acceptable to withhold the money that is due the sales person. This too is an all too common practice.
By holding back commission the money stays in the employers account longer collecting interest. Some banks will pay higher interest rates for larger amounts on deposit especially at the end of the month. If the sales person get a share of this extra money it is well worth their wait. If not it this will be seen as an attempt to do them out of their money.
People who have that uncanny ability to convince others to buy their goods, services or products are unique in what they do. Their mindset is radically different from that of somebody who will just get paid “X” amount of dollars and that is it until the next salary review comes along. Sales people live for the art of putting deals together including the back and forth negotiating that goes on so they get a price that falls within a certain range.
Putting a high volume/high revenue generating sales force together is no easy task. Once the team is set with the appropriate agreed compensation in place you have an obligation to “do the right thing” with them. Playing games when it comes time to pay them or other aggravating practices may cost you their services. It is expected they will take their clients with them. You had what you needed in place but you willingly and willfully let it slip away.
The bottom line is sales equals jobs which equals tax revenue for the municipality where the company is housed. Take away the sales means you take a piece of the economy as well.
Coming from a person of your stature, I am not surprised, Dear Joel Sir, this article gives a clear picture of the conservative approach that some businesses take, and consequently suffer the damage. As the moving force in the employment industry, especially in one of the hottest job markets, in the largest center of commerce in the world, you have seen it all. I hope this article ruffles some feathers in getting the sales people their due in a more prompt, and respectable fashion.
Thanks a lot!
Bharat,
I have seen a lot and done a lot over the years.
My personal secret to success was to simply outwork my competitors or when necessary drag them through the mud!
Business here in New York is cutthroat and very fast paced not to mention super aggressive.
As Frank Sinatra sang in his classic song New York, NY there is a line that says it all (“if you can make it here you can make it anywhere”)
Non-competes notwithstanding many businesses would rather “screw” (forgive my language but there is no other way to put it) their salespeople hoping they would leave so they don’t have to pay them their commissions not realizing if they want to take their clients with them a piece of paper won’t stop them as it never stopped me.
Compensating you salespeople with a salary plus commission or draw vs. commission makes them want to sell more.
If under those arrangements a salesperson does not produce their salary or draw gets taken away.
YOU WOULD DO VERY WELL HERE!
Thanks for your compliment, Dear Joel Sir! I know how disturbing it is for the productive salespeople cheated of their hard-earned income. But, truth be told, even to this day, so many business fail to see the value of these ‘moola-makers’ talent. The resulting loss also causes valuable clients to migrate with salesperson, and by the time they realize their folly, it is already too late.
Bharat,
You “hit the nail on the head” as they say.