North Central Business Journal News
WILL COMMISSIONS MOTIVATE SALES PEOPLE?
(February 2002 issue)
by Sandra Kay Neal, Ph.D.
reader contacted me with a problem regarding whether people are best motivated
by a commission system.
answer is not a simple one. Sales is a job category that covers a
vast array of different aspects. If the job is inside sales, a small
commission is useful but a needs to be added to a salary since the tasks
involved in inside sales include taking care of business details that are
not directly tied to a specific sale. The small commission operates
like a bonus for good work and helps motivate employees to do more than
just “mind the store”. However, it is not helpful to pay inside sales
people solely based on commission because the company expects those people
to be present during store hours, whether they make a sale or not; therefore,
they need to be paid for their non-productive time.
the job is outside sales, the answer is still not simple. Some sales
people enjoy the thrill of making a lot of money through commissions.
These people prefer a large commission percent without a base as they can
make more money “working for themselves”. But because they are working
solely for themselves, they have minimal company loyalty and will be likely
to leave if they perceive the least amount of difficulty. Increasing
the commission percentage is one of the few means available to a company
to keep a commission-only sales person working for the company.
are other sales people who prefer the security of a base plus commission.
The advantage to a company using this pay system is that these people are
paid by the company to do business details, and may develop more company
loyalty. This pay system is particularly beneficial if the amount
that can be made in this sales job is relatively modest (e.g., between
$30,000 and $40,000 with both base and commissions).
that offer the pay system known as draw plus commission may wish to rename
the system “base plus commission”. Although companies understand
that “draw” means that the person is “drawing” against expected commissions,
the employees tend to think that the “draw” is their guaranteed income.
Since that is how they tend to think, it is beneficial for the company
to treat it as such. The company also has clout in expecting the
employees to attend sales meetings, participate in sales training programs,
as well as handle business details that are not directly connected to sales.
A certain volume of sales can be incorporated into the job description
for purposes of performance reviews.
the sales employee begins to generate a large number of sales, it is helpful
to “promote” that sales person to a larger commission percentage.
Some company owners balk at doing this because when they look at employee
costs, the line item increases drastically. However, if these owners
look at the total income, they will notice that these sales people are
generating a substantial increase in company money. Increasing the
commission percentage still provides the company with more money than existed
before – it is a win-win solution for everyone. Gradually increasing
the commission percentage rewards the employee for exceptional work, which
tends to increase company loyalty and reduce the prospect of a top-quality
sales person quitting.
Neal holds a Ph.D. in Industrial/Organizational Psychology and has 19 years
experience helping organizations solve human resource issues.
Her company, Synergistic Organizational Solutions, specializes in aiding
small businesses. Dr. Neal can be reached at email@example.com.