Commission or Salary what’s the best way to compensate your sales team?
I was listening to Brian B on his The Travel DJ Blend podcast where he was talking about commission versus salary for salespeople. It got me thinking about all of my clients who ask me about the right way to set up a compensation plan for their sales teams (whether they’re a team of 1 or more). While there’s no one way that’s right for everyone, there are some things to consider when setting up your compensation plan.
Listen to this new 8-minute episode for some ideas on different compensation options.
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– Commission or salary, what’s the best way to compensate your sales people? Listen to this episode and find out. Hey, it’s Alan Berg. I was listening to a great podcast by Brian B, Brian Bonacci. If you don’t know him, he’s got a great podcast and he was talking about commission structures for sales people. And this can be a little bit of a controversial topic because some people are paying their salespeople straight salary, and maybe they have a bonus structure on top of that. Some people have straight commission. Some people have salespeople as independent contractors. So there’s all different ways to do it. And I come from this as a perspective where I have been a salaried employee, I have been a straight commission, full commission. It’s actually how I started in the wedding and event industry, and then some combinations within there.
So what’s best for your team? Well, for me coming from a background where I have been on straight commission, as well as salary plus commission, I prefer that my customers, my clients, people like you, are paying your people at least partly on commission, if not a good percentage of it on commission. And a really strong salesperson would prefer that because their income is more unlimited that way, because every sale they make, they’re going to make more money. But I also know that there’s the security of having a salary. The problem is some people could be getting all salary, no commission, and they’re fully motivated, they’re going to go and sell as much as they can. That’s not the case for a lot of people and people can get complacent because they’re getting paid. No matter what, they’re getting paid, no matter how well you do. I like my salespeople to have a skin in the game and that their success relates to my success.
So the more successful the business is, the more successful the people are. Without any caps, without saying, “Gee, you know, “you’re making too much money.” I actually had that happen to me one time. I had taken a new role and I hit the bonus structure that they had put out for me. And it was just a salary position with a bonus and if I hit a certain number, it was a very, very big bonus. And I hit it and they tried to say maybe it wasn’t quite as much as it was and I showed ’em that it was. I’m also the son of an accountant and I was a part accounting major in college, so I’m pretty good with numbers. And they paid me the number and the reward, I’m doing air quotes, the reward was that the following year my bonus potential was now half of what it was the year before. Now it makes no sense that you would penalize somebody for doing what you asked them to do, which was to hit a high pie-in-the-sky number. And when they do it, you actually penalize them by saying, “You don’t have that potential anymore.” Because you’re only getting a piece of that top number, you’re not getting all of that difference so why not pay your people really strongly if they do what you really want them to do? So why should they be at least part on commission? Because they have to feel the pain if they’re not selling and they should feel the rewards if they are selling, because again, their success leads to your success. And then the more they sell, the more commissions they make. As a matter of fact, I think you should reward them for going even higher because those additional dollars are more profitable for you than the first dollars. The first dollars have to pay your overhead. The later dollars don’t have to pay your overhead because your overhead’s already paid for. So when they go higher, more of that is already for you, profit so why not reward them with more because they got you there? That bottom line is because of them helping you hit there.
So is it bad to have people that are on straight commission? No, it’s not bad. It’s all about performance. Tell them what they need to do, let them go and do that, and have some sort of a structure where they’re rewarded for those numbers. That you can have individual and team bonuses if you have more than one salesperson. One of my clients, they tell everybody the number they need to hit, and then if the company does another number higher, everybody gets a bonus. And then if they go even higher than that, everybody gets a bigger bonus. And this is everybody in the company, whether or not they’re in a direct sales role. So they’re having everybody rowing in the same direction by saying, if we, as a team, do this, everybody gets this, even if you’re not on commission with your normal position because you’re in maintenance or whatever, but everybody gets rewarded as part of that because we all helped make that happen.
Commission versus salary. Again, for me, I prefer that people are at least partly on commission or that part of their income, the part that they they want to hit, is somehow related to performance because they have a skin in the game which means they’re going to want to get to that number and in order to do that, everybody succeeds along the same way there. Bonus structures. One of my clients, I remember, we had a sales training meeting and everybody seemed to be getting along together and one person was kind of by herself and I asked the boss what it was and she said, “She’s our number two person. “She gets five star reviews. “Clients love her.” I said, “She’s not a team player?” She said, “No, no, she’s not a team player. “She hates team bonuses “because she thinks somebody else can bring her down.” I said, “Does she socialize “with the other people on the team?” “Not really, that’s not her thing.” It’s what you call a lone wolf. Someone who’s a high performer if you leave them alone. Well, that person can perform well, but they’re not going to do well with team goals. And the boss asked me, she said, “Can you change her?” I said, “No, I don’t think so.” That’s a personality trait. High performer, customers love her, but she’s not going to be a team player because she doesn’t want to be have her income in any way, the effects of what somebody else is doing because she can’t control that. So she said, “Well, what do you think I should do?” I said, “Well, if you’re okay “with having a full team and then her, “then leave it alone.” If it ain’t broke, don’t fix it. If you feel that that team bonding is important, if you feel that that team goal is important, then no, you can’t change her and then you decide what you need to do.
And that’s really what it is, some people’s just personality traits. It’s just like you can’t have all superstars on your team because they’re hard to manage. A few of them, sure. But you need team players, people that are going to do a good job, put their head down, do a good job, they’re not looking for the limelight, they just want to do their job, get compensated well, be appreciated for what they do, but they don’t need to be that superstar out there. I remember, I think it was this, one of the Seattle teams, I think it was the Mariners that famously many, many years ago, got rid of all their superstar players and then they started to win because everybody else played as a team. The superstars, with the divas, and was like, “Hey, look at me, look at me,” but they weren’t actually cohesive as a team. Commission versus salary. I think you need to think about what’s the best thing long term for your business and don’t worry about those as people on your team making a lot of money as long as you’re profiting well, because they’re the ones that brought you there. I hope this gave you something to think about. Let me know your thoughts.
I’m Alan Berg. Thanks for listening. If you have any questions about this or if you’d like to suggest other topics for “The Wedding Business Solutions Podcast” please let me know. My email is [email protected]. Look forward to seeing you on the next episode. Thanks.
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- YouTube: www.WeddingBusinessSolutionsPodcast.tv
- Spotify: https://spoti.fi/3sGsuB8
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