3 Problems Solved: Stop Paying Salespeople Full CommissionAug 01, 2022
It’s been 4+ years since I made the switch away from full commission-based salespeople and moved to a full salary package, the transformation has been eye-opening.
When the company started growing and we needed to hire salespeople it was industry standard to pay full commission. So being a young business owner, with little experience, I followed the industry’s lead and brought on a team of full commission-based salespeople. I learned very quickly how extremely challenging it was to navigate the complexities of a full commission-based sales team. Three challenges stood out to me as the MOST difficult to deal with.
Not My Job:
One of the biggest hurdles we faced was this constant battle of getting the sales team to do anything that wasn’t directly related to selling or something that could earn them a commission. It was always arm twisting and ultimatums to get the sales team to handle certain tasks that they deemed “Not My Job” based on the fact there was no way for them to get paid by doing it. Honestly, I understood their argument. They were not being paid for the time they were spending when it came to project management or customer service tasks. They were being asked to look at the bigger picture and realize that a portion of the commission they were being paid was to handle these tasks. Here is one thing I have learned after 25 years, keeping compensation packages clean and simple makes life better for EVERYONE involved.
Every Thursday the operations team will sit down and review the upcoming week’s production schedule. Without fail, there was always a conversation or two about a particular project that was either going to be very challenging (if not impossible) or a discussion about something that was sold that we don’t normally do (aka “A Hot Dog”). Many of these projects were being sold because the salespeople needed to make a commission to get a paycheck and pay their bills. How could I blame them for doing what they needed to do to survive under the pay structure I had put them on. Luckily we were talented enough operationally to execute everything that was sold but the damage being done to the relationship between operations and sales was a real and constant struggle. Moving away from full commission and onto full salary allowed the sales team to be more selective in their process and subsequently greatly improved the quality of the sold projects. Which in turn enhanced the relationship between operations and sales. Certainly, this has not eliminated the bad projects but it has substantially reduced it to a point that was very noticeable within 3-6 months after the transition.
Not many full commission salespeople want to be driving an hour each way to look at a $500-$1,000 foundation crack repair job. It makes perfect sense, right? Making $50 for 2-3 hours is not great. Full commission salespeople want to be looking at good size projects for obvious reasons. On the other hand, I am a big believer in focusing on customer acquisition, not the initial sale price. Earning the customers’ trust and then working with them over the life cycle of their time as homeowners is critical to the long-term success of the business. Immediately you can see that sales and management teams do not hold the same primary focus. I have found that whenever departments are not in sync with each other’s primary objective you have problems. By eliminating the salesperson’s concern about earnings related to the time spent on each opportunity it allowed them to focus on customer acquisition first.
There are numerous other pros and cons to this shift away from full commissioned sales teams at RBS. I also understand this type of move may not be for everyone. I am sure there are plenty of business owners and sales professionals, much smarter and more experienced than myself, who have solid reasons behind the benefits of a full commission-based sales team. Admittedly, this change did not solve all the problems that inherently exist between various teams within your organization. What I can tell you is that it has increased the results of every key metric we use when evaluating the performance of our sales department. It has also allowed us to move one step closer to truly creating a culture of collaboration and teamwork within the company. A culture that I believe is critical to the long-term success of both our employees, our customers, and our organization as a whole.
If anyone is interested in learning more about how we made the shift or finding out more about RBS, please feel free to schedule a time to talk with me. Schedule Call