How do I reward my sales team? Commission or salary?

This article first appeared on December 16, 2009.

Dear Aunty B,

We have made a big investment in sales staff this year in order to boost sales (of course). But I don’t feel I am getting the best from them – or so the sales figures tell me.

My question is this: should I be paying them a straight salary with a bonus or put them on straight commission? Or should I outsource my sales?

Want more sales,
Mildura

Dear Want more sales,

The old commission versus salary question hey? Normally you pay a straight salary when it is a complex sale and when team selling is important. Our sales blogger Sue Barrett says one example of this is when products are presold through advertising and the sales person just takes the order. In that case you would put them on salary.

The downside of this way of selling is that lying under the surface of every salesman and woman is a bulldog. To unleash the bulldog and get them to chase every sale you need to dangle an incentive like a piece of meat.

A straight commission is more straightforward: You just pay a percentage of sales made or on the gross profit of the sale made. This rewards people for outcome and of course is less expensive as you are not bearing the fixed costs of the sales staff.

The problem you have with straight commission selling is you have no direct control over the sales staff. They might represent your company in a way that does not reflect its values or promise the world to get the commission and ignore the costs, thereby impacting on profit.

You can always try salary and bonus which gives the sales people security but also incentivises them. This can work well when you are building a sales team because it encourages the high performers to get the others over the line in order to get their bonus.

You could pay salary plus bonus plus commission but this is overly complex and is used when you want to reward a wide range of behaviours such as meeting company profits and great customer service.

So to answer your question – which is very short on detail – I would get in a specialist to overhaul the structure so that you get a better result. And can I also suggest you look wider than this? Often sales people don’t reach targets because the strategy is not right, their goals are not clear or the marketplace has changed. Remember you can’t sell what the marketplace doesn’t want.

Good luck!
Your Aunty B

Aunty B is kicking back on holiday, but her advice is timeless, as evidenced by this Aunty B classic from December 2009. To read more Aunty B advice, click here.

Email your questions, problems and issues to auntyb@smartcompany.com.au.