Introduction
When hiring a sales person, it is essential to take into cognizance, not only the basic salary, but also any other incentives specified in the company’s policy. Incentives could take the form of reloadable gift cards, free vacations, keeping employees healthy, taking care of the staff’s family, money gifts and even saying thank you amongst others. Incentives could also take the form of extra pay for meeting organizational target excellently.
It is also vital for any organization to understand that keeping employees happy in the office can make the firm resolute and unfaltering within the industry. Obviously the only way to keep the employees happy and motivated is to pay salaries promptly and give incentives regularly.
Further to consider when giving incentives and paying staffs basic salary are the hierarchical & organizational structure, seniority and the level of job responsibilities. A staff with more responsibilities should receive better incentives than those with fewer responsibilities.
Another crucial and vital thing to consider in this write up is salary and incentive negotiations. Everything is negotiable in this world. It is even possible for you to negotiate when you are going to negotiate. Negotiating the salary and incentives terms of employment can help to drastically cut down company’s expenses sometimes, while maintaining staff’s satisfaction. When a staff is satisfied with his or her earning, he or she tends to be highly motivated to deliver beyond the employer’s expectations.
Why sales people work with commissions?
A commission is an income payment based on a percentage, (sometimes) of the selling price of a service or product. A commission is a particular type of incentive for workers and it constitute another form of earned income as well.
Commissions link output directly to income. This makes them vital compensation elements and not just some “icing on the cake”. Most staffs often consider commission a core component of their overall compensation and not “just” some extra benefit.
Commission methods of remuneration are great because commission pushes the workers to strive to achieve beyond the organizational targets. There is absolutely no ceiling on the earnings for the worker or salesperson and the company. However, not all sales people would like to work straight commission. Some people love to have a combination of part basic salary and part commission depending on the organizational policy.
The fact is that the most valuable asset a company can acquire is high quality personnel. Pay your staffs well, if you want to attract the best sales talent for your organization or company.
The company’s culture is also very important to consider. If the organizational goal is to hire salespeople that are inexperienced and save some money by not paying well, the company will get the value of what they pay for.
In the competitive environment of today, companies and other establishments are hungry for high turnover. They compete with hundreds or even thousands of other companies that offer very similar products or services. Apparently they need highly motivated quality staffs to stay ahead of the competition.
Sales people generally love commission because it can easily motivate them to work more and earn more even if the company’s work policy is not too friendly.
Imagine a scenario where a company exists without staffs or sales persons. It would become very difficult for the company to survive. Sales persons and staffs are unique in the sense that, when motivated with commission most of them render multiple services indirectly. They turn themselves to marketers and referrals in order to get more sales and better remunerations. This results to higher sales and definitely higher revenue to the company. A commission scheme is the basic path to make a sales person achieve and most of the times to over achieve targets.
Sales people share the same vision with their employer; they share the same worries with the management. They feel they are a vital part of the organization. Hence, they want a little share of the organization’s success. When they receive or have the hope of receiving their shares in form of commissions, they tend to be conscious and aware that they must strive hard to make the organization progress and achieve set goals and objectives.
Why not working only with a basic salary?
Basic salary is the amount of money an employer pays to an employee before any extras are added or taken off. It is a fixed amount of money paid to an employee by an employer in return for work performed. This means that it doesn’t involve any compensation even if the work rate of the employee differs from one earning period to another.
The following are the reasons why employers shouldn’t work with only basic salary.
If a sales person receives basic salary on a monthly basis. He could refer a hundred customers in a month and make almost a hundred sales in the same month. If he relaxes in the next month and refers only forty customers and about thirty five sales, he still gets the same salary as in the previous month. This will give room for laziness and low rate of progress. Another scenario is that; when a sales person makes about a hundred sales and another makes only about thirty sales within the same period. The former will feel cheated and relax, if all they get at the end of the job is the same salary. Sales will therefore fall in the next month. Thus, achieving organizational goals may be delayed. If the organizational policy is for sales person to have a target, once the sales persons meet their target, they sit back and do nothing because they’ve meet the requirements for their salaries to be paid. On the other hand, if the organization runs a commission structure in which staffs earn additional income when they reach certain milestones outside their basic target. Idleness rate would be reduced and definitely, more sales are certain.
A sales person makes tremendous efforts to reach the targets. If one effort doesn’t bring results, he or she moves to the next one, and then the next one and so forth. To make this endless effort continue, he needs to get constantly motivated. Of course the basic salary wouldn’t motivate him, because without applying too much effort, the employer is obliged to pay the employees.
The bottom line is that if you give only basic salary to your sales personnel;
- They will do only the bare minimum that is justified by their job description. There will be no extra effort.
- There will be no internal competition in the company. Internal competition brings about efficiency and in turn helps the company to grow. When there are incentives, sales people try to achieve beyond their targets and strive to outrun their colleagues to prove they are better.
What if you give only commissions?
- Sales people might feel used, only to achieve the selfish goals of the organization. This might result to unnecessary pressure and stress. Too much pressure and stress often end up affecting people’s work negatively.
- They might become more aggressive selling the product, and this is a big turnoff to most clients.
- Sales people will bring more revenues “only” in the short term.
- Sales people will not work as part of the team, they will rather work independently and selfishly with the risk to become lonely wolves, a sales style that is not recommended in today’s sales world.
- Sales people will work in every direction and open minded as well as committed to bring the goals that are set.
- Sales people will focus only on the sales process and not to any other activities such as administrative work or team work initiatives.
Paying the right mix
- Paying a mix eliminates the risks of having no income in bad years but also motivate sales people to take a further step in achieving organizational goals.
- Companies should be able to take into account the pros and cons of paying commissions to sales people to decide on the payment scheme.
- The right mix is the answer but needs to apply across the board to other positions as well.
- Many factors affect the decision of the right mix including the industry, the product, the target clients and the job responsibilities.
Conclusion
Apparently we have emphasized on sales people to be rewarded with commissions.
Despite the fact that commissions pushes the workers to strive to achieve, even beyond the organizational targets. There can be some justified opposition.
Here are three examples;
- Since sales people are hired to perform their job for a salary why do they need commissions? The statement raises the fact that each employee is hired to do a particular job for the money he is offered. Of course his or her career path is subjected to the level of excellence he or she attains on his job. A sales person is hired for a salary to perform a quota which requires selling the product to a target audience.
- What about product people? Product people might also claim that the high quality of the product brought a huge sales and not the effort of the sales person. However it is difficult to grant them a commission because the claim is not quantifiable. Moreover they don’t need an extra effort to produce more goods. Their job is routine.
Although of a truth, a high quality product commands higher sales rate and ease the sales person’s job.
- What if there is a bad year? Where a sales person gets commission in a good year, and just gets nothing if there are bad years when the company even makes losses?
If he shares the successes, why not share also the failures?