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Tailoring sales remuneration to attract the right candidate
(Part 2)

Commission or salary, or a bit of both?

Recent research has indicated that, in a fast-paced and growing industry, salespeople are likely to be most satisfied, and productive, if they are paid on commission. The reason for this is that this particular sales environment ensures feelings of success (only truly ineffective salespeople will fail in this type of industry).

Therefore, sales people receiving commission will be the happiest, unless they are ineffective to begin with – and won’t last long anyway. On the other hand, a larger salary base may be helpful if the industry is unpredictable, slow or declining. Here, even talented salespeople are likely to experience some failure. In order to protect them from losing confidence, they should be given the option of a higher salary.

Personality and motivation also plays a key role. A person with enormous drive can work for very little money at first but cannot tolerate a cap on their long-term earning capacity.

If a salesperson is more motivated by consistency and predictability, however, a heavily commissioned compensation structure may have a demotivating effect because it is seen as too risky.

It’s an interesting quandary. Historically, commissions have played a large role in distancing salespeople from other employees. The result is a lot of animosity and resentment, leading to inevitable conflicts, but they can also lead to high performance by the employee, particularly in bringing in new business.

But the value of long-term relationships has also become widely studied in marketing because evidence has found that growing an existing client base can contribute to the real long-term growth of a company (the 80:20 theory which suggests that your top 20 clients contribute to 80 percent of company revenue).

In fact, organisations – and the HR professionals who support them - should view compensation structure as a potential barrier rather than a booster to sales performance. The wrong compensation structure, such as putting an earning cap on a highly motivated sales person, is much more likely to be a demotivator than the right one is to provide long-term motivation.

In other words, the right compensation structure is likely to prevent a salesperson from leaving, but it won’t necessarily make them a superstar. .

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