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The "100% Commissions Motivate" Myth

Written by: Virden Thornton

Article Overview: There's a good reason why over 97 percent of progressive companies and service industry firms that I've consulted, use a form of a "hungry base plus commission" compensation plan for their sales professionals, rather than employing a straight commission pay structure. The reason is simple, straight commission pay plans demotivate many more sales professionals than they motivate. Straight commissions reward a specific type of sales professional--the top three to five percent of the sales professionals in the top 20 percent bracket.

The "100% Commissions Motivate" Myth

There's a good reason why over 97 percent of progressive companies and service industry firms that I've consulted, use a form of a "hungry base plus commission" compensation plan for their sales professionals, rather than employing a straight commission pay structure. The reason is simple, straight commission pay plans demotivate many more sales professionals than they motivate.

Straight commissions reward a specific type of sales professional--the top three to five percent of the sales professionals in the top 20 percent bracket. However, with their ingrained drive to succeed, these top producers will seek higher levels of performance no matter which compensation plan you choose. Since you will rarely interview one of these top producers, let alone hire one, if you want a sales team of top producers, you'll have to develop them. Straight commissions make developing (training and coaching) a top producer almost impossible.

It is vital that you hire sales professionals who are driven by an inner force to achieve success. This force or "achievement drive" is the most important attribute you can discover in the candidates that you interview for your sales positions. However, straight commission compensation plans just don't give you enough time to effectively develop the new employee, once you've found one with the inner drive to achieve the success levels you're both seeking. New employees simply run out of money on a straight commission plan, long before their selling efforts start to produce monetary results. Also, even if a new employee is given a mature territory with a number of long-term clients or customers, straight commissions usually encourage them to maintain present business levels at the expense of developing new business. If you have been managing sales people for any length of time, you've seen or experienced the problem of the representative who lives off the residual commissions of stable clients or customers and never generates a single new account.

If you want to sell a full product or service line, avoid the straight commission pay structure. 100% pay plans encourage representatives to gravitate to the products or services that have the highest payouts, usually at the expense of all the other products on your line card, in your catalog or in your service offering brochure. You may have products or services that are of strategic importance, to your vendors, clients or partners that you must honor. Or there may be products or services that you must sell, due to changing market conditions or discount rates or higher profit levels. If that's the case, then a straight commission is counterproductive, because 100% pay plans reward the sales person to sell more of what ever is easiest to sell.

As discussed above, 100% commission pay plans are designed for a rare breed of sales professional. Like professional base ball players who go into batting slumps, sales representatives, even top professionals, also experience selling downturns. It's just part of the human experience especially with new employees. Why then would you employ a compensation structure that demotivates a slumping sales professional, even further than his or her temporary inability to produce sales? A hungry base plus commissions and/or bonuses is the ideal compensation plan for developing superstar quality representation and for your top producers as well.

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Article Tags: attribute, business levels, compensation plan, good reason, interview one, length of time, managing sales, money, new business, pay structure, progressive companies, residual commissions, sales positions, sales professionals, straight commission, straight commissions, term clients, top producer, top producers



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