Expert Author Clive Miller
Why do people choose a sales career? Some non-sales people reply "because they can not do anything ."

The most common answer from sales people is "the money." Most professions require years of study just to earn the title, Architect, accountant , engineer , Solicitor, Barrister or Doctor. Once qualified these professionals still need to build their experience and reputation before they will command the high remuneration related to their occupation.

Sales people haven't any such barriers to entry yet those that succeed often earn similar incomes. Some can favourably compare their pay with top Barristers. Earnings in more than 250,000 pounds sterling aren't uncommon in fast growing industries.

Why do sales people get paid so much? Presumably, because companies find that sales people generate business more efficiently than other means. Most employers reward sales success with commission payments because it works. Do the commission earners deserve it?

Sales people, on the average , support the roles of 27 people , consistent with one study. If you're taking under consideration those working for suppliers, this statistic holds some credibility. it isn't suggesting sales professionals could do their jobs without those 27 people, just that if their sales weren't made, the roles couldn't exist.

Commission plans invariably attract criticism, from both those that benefit and people who don't. Jeffrey Pfeffer of Stanford University's grad school of Business extols the wisdom of not tampering with pay systems. On the entire this is often sound advice. within the case of commission plans, it's seldom possible to follow.

Most schemes are initially supported simple principles, then suffer continuous modification, as circumstance change or unwanted side effects are discovered. Hurried or ill-considered plans need more changes.

Let's consider the choices from a management perspective. Commission based motivation gives sales people what they need - a way of control over their own destiny and non-judgmental performance feedback. Should we be surprised once they act in accordance with their compensation plan and private needs, instead of in response to management directives?

Changing strategic objectives prompt changes to commission schemes. Instructing sales people to specialise in services has little effect if most of their income depends on product sales. Quick fixes within the sort of special incentive payments can make things worse, as they did at one company I worked for.

The extra incentives intended to extend sales department attention on low-end high volume products, pushed payroll costs over budget, without having the specified effect.

Many variables effect sales behaviour and motivation. the combination of base salary and performance pay, the measurement period, when commission is paid, the tactic of measurement, accelerators, how high the 'on target' bar is about , and capping all play a neighborhood . Inconsistent levels of payment for various products and services ads an extra layer of complexity. municipal government design warrants an excellent deal more attention than it always gets.

Mix of base salary to performance pay

Attention swings towards winning immediate business because the ratio of commission to salary increases. Aggressive accelerators accentuate the urgency of meeting or exceeding every sales target. a bit like water, sales people motivated this manner will always find the quickest root down Capitol Hill . Opportunity for gain concentrates the mind. Longer-term considerations like new market development, and even new products, could also be ignored unless they generate clear upside earning potential. Advocating team behaviour under these circumstances is like trying to push water up hill.

High base salaries with small commission elements encourage long-term focus and good corporate citizen behaviour. Relationships and reputation are better maintained. Strategic sales opportunities receive more attention. In my first sales position bonus payments supported company performance and individual salary provided team oriented motivation. Sales people were more inclined to go to customers who had no immediate business to put . In larger companies, this approach can direct focus faraway from profit and revenue milestones towards being seen to try to to the proper thing.

The measurement period

Orders tend to bunch up at the top of measurement periods. Sales people naturally specialise in the business at hand and neglect prospecting. Pressure to shut business in time for measurement period end dates, pushes pipeline work into second place. Countering this with monthly or weekly sales targets results in lower value orders as sales people increasingly attend to opportunities with shorter sales cycles.

Quarterly, half-yearly or annual measurement periods tend to end in long famines and bigger orders. Activity targets, that are designed to enhance order flow, but are left subordinate to the compensation plan, are largely ignored or receive hypocrisy . Attaching payments to activity targets may encourage manipulation.

When they get their commission

Paying commission against orders causes sales people to maneuver quickly on to their next opportunity and reduces their interest in delivery and implementation.

Deferring payment until the customer pays disconnects sales success from the reward, devaluing the commission scheme. With some schemes, sales people might not receive the commission related to a purchase for 6 months or more.

In my youth at Sun Microsystems, many folks spent a disproportionate amount of your time checking indecipherable commission statements and querying pay cheques. We also became involved within the collection of debts.

As you would possibly expect, such circumstances work against the aim of commission plans. Happily, for the sales department , and for Sun, the scheme was improved.

The measurement method

Basing 'performance pay' on profit steers sales people to sell whatever products or services have the very best margin, no matter management intent. For resellers and distributors this has the advantage of providing automatic feedback of market preferences and opportunities. It also helps control cost of sales.

For larger companies it frustrates marketing strategy. Paying commission on revenue reduces interest within the price paid and helps the pursuit of market share and strategic customers. On the down side, profit margins become harder to regulate .

Accelerators

Changing the worth of commission consistent with performance spurs sales people on to greater effort when the effected number is seemed to be in reach or achieved. this might end in more price pressure from the sales person, in order that he or she will buy business forward.

Accelerators also can encourage sandbagging. If a sales person thinks the target related to the accelerated commission rate is out of reach, he or she is probably going to sandbag to preserve orders for subsequent measurement period. Overall accelerators increase motivation, sales, and earnings. Accelerators are difficult to allow If quite the expected proportion of a sales team achieve accelerated commission.

Clear goals, careful consideration, consultation, and testing are essential for designing about the only commission schemes.

If the task falls to you, adopt a cynical mood and picture you're a recipient. Think through how the planned scheme or changes will effect your earnings and actions. Ask peers to try to to an equivalent . Get a number of your sales people to offer you feedback. Ask your accountant or financial director to select holes in envisioned schemes before they're published.

Repairing mistakes after a compensation plan is issued is nearly always expensive. Sales people will have made target commitments supported the published compensation plan. If adjustments could mean less money, they're going to have a de-motivating effect.

Effort invested in planning pays dividends in sales results and reduced need for management intervention. Whenever sales compensation needs revision, remember the 1 - 10 - 100 rule. Right first time costs once. Right second time costs ten times. Right third time costs 100 times.
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