Sales Compensation Plan Musings
Sales Compensation Plan Musings
I worked in professional sales and managed sales professionals for many years. In all cases my compensation was percentage-of-sales commission-based. I liked commission compensation because I controlled my earnings. I was never in a group commission arrangement and would not have accepted such, because I would not have been the sole determiner of my income. However, there are as many versions of commission compensation as there are grains of sand on the seashore.
My first professional sales job paid straight or "pure" commission. I paid all my expenses and received 16% of all sales, plus a desk, a phone, and secretarial help, when I chose to go to the district office. I received half of the commission in the month the order was entered and the remaining half in the month when the order was shipped: paid in one check at the end of each month. It was fairest plan I ever worked with: no one could mess with it by creating a new interpretation of it. If you could not sell enough and went hungry, you quit and found other work. Managing sales professionals under this plan was simple; you helped them to get the job done, you trained and supported them: You did this enthusiastically because your income was dependent on what your sales people sold.
Every other plan I worked with demanded interpretation and the happiness of the sales person depended on who was doing the interpretation and their level on the organization chart. The plan I liked best was one that gave me a monthly check, referred to as two thirds of "planned earnings" plus a check at the end of the year for the difference between the sum of twelve checks and the total commissions earned in the year. You also were paid for travel and living expenses including mileage in your territory. Managing sales professionals under this plan was the same as straight commission and worked well as long as the products being sold met the needs of the customer.
When the products did not meet the customer's perceived needs, or were no longer competitive managing became a series of tough decisions. You kept your best sales people because they could live on the monthly check until such time as the product was improved; hoping it would happen quickly. If the product would not support enough sales to cover the monthly check you either convinced management to write off the difference, or you tried to sell the sales people on accepting a reduction in the monthly check and hoped you could hold them. If a salesperson declined and quit you divided their territory "temporarily" among those that stayed expecting them to keep existing customers and thereby earn enough to cover the monthly check.
It was important to keep as many sales people as possible because they were your best communication line to the customer. The customer-salesperson trust relationship was key to learning how to improve the product so it would again sell. As manager I had to convince management that asking the sales force to accept reduced income while management did not reduce its own, was unethical since product shortcomings resulted from their failure, not the sales teams.
Success depends on supporting others and sharing the results of your own experience.
Wes Zimmerman
Labels: compensation, compensation plan, management, sales, success
posted by Bill Austin @ 8:13 AM
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