Sales Remuneration Schemes

Most people in their careers leave education start work on a low salary and then build this up continually throughout their career as they progress.  Salary equates directly to status level.

In sales there can be many more parts to a remuneration.  Different elements motivate and reward in different ways. This article is to give you some idea of the challenges in getting it right before you recruit.

A salesperson’s pay is made up of basic, commission and incentives. There are schemes mixing these in all possible combinations.    They are all appropriate in different circumstances, companies and cultures.  Few employers really understand the psychology of selling and how to design a remuneration scheme for their goals.

Unlike many other types of employees the results of salespeople are very clear and transparent.

The Basic Salary.
Most companies make the mistake of competing for the best sales staff by offering higher basics.  Logical as that is how they compete for better technical staff.  This does not work in sales.  In sales a basic is for serving time, it has no relationship to results.  Sales people always perform better under pressure.  Good salespeople know that it is all about results and that high income for them comes from taking more pressure.  Good salespeople are also more motivated by the money they can earn by returning results than security level provided by a basic. The average want pressure off to perform and will always focus on the basic alone.

So, we recommend starting new entrants on a basic that covers their living cost but little more.  We do though strongly believe in incentives.

So, for example.

Offer a basic salary to start of say £25,000 pa after completion of the first three months induction.  Until then it is £20,000.   This will put off the ‘coasters’ who are only interested in a basic.  For people developing a career 3 months is irrelevant. But what you have done and must continue to do is associate reward with results. Pavlov style conditioning works.

Commission
Your objective with a commission scheme is to motivate salespeople to take action with an urgency, motivate to peak performance and also to lock in the good staff for the long term.

So usually we recommend having a commission schemes that goes to a higher level on performance. So, for example:

3%, sales up to £5,000

5%    sales from £10,001 to £20,000

10%  £20,0001 plus

So each category includes all the sales from zero meaning it a massive incentive to get to and maintain peak performance.

Then assuming you have repeat payment clients have it repeat for that client.  There are a lot of variations within this depending on your sales receipts pattern.

Incentives
Salespeople have their emotions go up and down each and every day.  They need managing.  On the low’s confidence needs to be built, on the high’s momentum needs to be maintained. This is why managing salespeople is so challenging.

Part of the solution is regular incentive breaks, all related to performance.  This can range from a prize for being top performer in the week.  To a weekend in Marbella for exceeding quarterly sales target.

This all needs to be managed alongside other staff who are not so incentivised.

You should by now realise that you can’t get sales going by offering a competitive basic and just waiting for it to happen.

Hire Slow Fire Fast.

Whatever your remuneration scheme it has to return a profit quickly.
Be very choosy who you recruit and have a rigorous selection process. This will actually set up your job as elite and attract better quality people.  It is so expensive to recruit, train, manage and then for new staff to produce no, or below breakeven results.  When performance is not happening do not hesitate on getting rid of someone.  They will demotivate others and cost you a lot of money.  Three months absolute maximum, usually one month.

Every Manager I have even met will absolutely hate having to let someone go. It is not a pleasant task.  The problem is most procrastinate the decision rather than facing it. This leaves ongoing losses and disrespect in management from other sales staff and a negative sales environment which clearly tolerates low behaviour.  You need an elite team in sales, good ones will want to be part of an elite and will leave if you tolerate below standard performance.

 Alex McMillan (44) 07525916574  alex@successmoves.co.uk