At a recent Around the Horn session, we fielded a question from a gentleman who was a successful franchisee of a fast-growing business that had a strong sales component. He and his management team created a leadership structure, new mission statement, and are now considering an adjustment to their compensation plan to make it “salary plus.” That means providing a higher base salary while reducing commissions at the same time.
- The first comment warned that there may be some resistance and attrition, due to the loss of autonomy the sales staff would experience.
- Someone else talked about the higher proportional salary component leading to a team atmosphere, with shorter term goals to motivate the team to keep up the sales.
- Another person cautioned against the use of quotas because they could de-motivate people once the quota has been reached.
Having worked in sales environments for years, I felt compelled to offer my own two cents.
There are a series of tradeoffs whenever a company chooses between salary and commission. Top performers are often comfortable with higher commission and lower salaries. Poor performers and slow starters prefer higher base salaries accompanied by lower commission rates.
A company’s initiative to foster a team atmosphere can reach out to the sales reps alone, in small teams, or as a team made up of the entire sales force.
Making teams out of all the sales reps is often a good choice because it enables all to prosper during times when the gross margin is higher, without hindering an atmosphere of competition. They will still manage to compete with each other, but not usually in a hostile way. As one attendee put it, people won’t try to steal other teammates’ business because they will be rooting for their peers as well as themselves.
And while team building is essential between peers, it may be even more important to build a rapport between the project managers and the sales staff. Project managers can lend an air of credibility to potential clients on sales calls, where salespeople are often assumed to be…less than honest. A project manager can also tell potential clients about technical details of the project that a salesperson may not be privy to.
Striking the right balance between commission and salary is not easy. This is where networking comes into play: by learning from other businesses in various stages of development, one can gain a broader view that would otherwise only be attainable through trial and error.
If you would like to join our next Around the Horn session to offer advice, or to receive it, contact me here.
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