In the July/August edition of Harvard Business Review, there are several articles about how to motivate and get the most out of your sales force. One article that I found of particular interest was entitled "A Radical Prescription for Sales", wherein the premise is basically that offering commissions to the sales people may not be the way to get the best performance.
As there is a shift from product selling to solution selling this makes absolute sense. The "if-then" reward system perhaps worked (and may still work) with simplistic sale, but when you get into high-value selling where you may need to take a lot more time in getting to the end-state with a client (and service the client post-sale) the commission structure could result in shoddy workmanship, if you will, because the sales person needs to already be focused on the next sale to make sure his/her income keeps rolling in.
The cost to the corporation is high for the selling of a service which inherently is operationally difficult to implement, because there is distinct dissatisfaction for both the client and the internal folk of an enterprise who are tasked with ensuring the project/solution is implemented and the profitability promised by the sales person remains intact...not a prescription for success.
This article in HBR refers to a company Microchip Technology which in the late 90's took their salespeople from a 60% base salary, 40% commission structure to a high base salary, which represented 90% of earnings for sales, and 10% was linked to the corporate (rather than the individual) measures. Not only was this the comp model for sales, but for the rest of the corporation too!
The result was sales increased and the cost of sales remained the same. This seems somewhat counterintuitive, but if you think of the sales force of today, vs. those of yesterday -- today you have highly educated self-motivated individuals whom you want to have working for the benefit of the whole vs. just their own pocket book. Several companies are embracing this "radical" approach with great results -- even GlaxoSmithCline.
When I was on the buying side of the equation, I was much more inclined to give business to those firms where I didn't feel like they were looking at their watches and hurrying to the next appointment so they could keep up their mortgage payments. Furthermore, it isn't just about getting new clients, it is about no losing those that you have. With a revised comp system you may be able to do this.
As a consumer I prefer to go into Best Buy, as opposed to The Future Shop. Both are owned by the same mothership, but I don't feel pressured at Best Buy and I feel that I'm getting the best advice, vs. where the sales rep will get the most commission.
So perhaps it is time to revamp the thinking on sales compensation. And if you really think about it, you could probably eliminate a whole bunch of accounting people too that have to keep track of the complicated matrix of sales compensation that most companies have!
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