How should salesmen be paid? OTE, salary, salary plus OTE.. What should your policies be regarding sales force pay?
There are answers to suit all tastes to these questions. However, in my opinion if you want a pro-active well organised sales force you need to go back to basic principles. That is, having special regard for sales department pay within the general pay structure in the company.
As an example we will be using a “typical” organisation in which clear divisions can be made between departments and responsibilities within an organisation with a clearly defined hierarchy. It is self-evident to all that each level has perceivable responsibilities and each brings a different discernible contribution to the company.
A fair payment structure will reward each employee according to his relative contribution to firm and that this be dependent on his place within the hierarchy, his competencies, and the degree of responsibility/autonomy in the discharge of his post.
For a moment, we will step back from specifically sales related pay to look at that of management and administration, logistics and accounting. In these departments, the pay lines are more clearly drawn based on function and rank, seniority, qualifications, responsibilities, etc. Thus, however hard and well an employee in these categories works he will never earn more than his superiors, even sporadically.
Going back to sales, if a major percentage of pay is purely based commissions on sales, a very common practice, we are feeding toxic elements that can harm our organisation such as:
- The salesman gets the message that he is only paid to sell. Please see my earlier article: “Salesman, what am I paying you for?”.
- We are encouraging the culture of the “quick buck” and lowest acceptable effort.
- The salesman does not get paid for all the endeavour he may put into achieving a certain level of sales which may cause frustration.
- We risk undermining the balance within the sales team.
- We may create “sales superstars” who may consider themselves above the rules and hierarchy.
- Generate job insecurity which will result in a high turnover.
Thus, however much a salesman brings in in orders will he ever earn more than his superiors. For all those who still believe that a salesman who sells more should earn more. I would just like to say that the only ones entitled to earn more if the company makes more are the shareholders. It is, after all, they who have risked their money and, very often personal assets. All the rest are employees.
So, what do I suggest?
It involves establishing income brackets based on rank, degree of seniority and responsibility to which we will add a percentage to reward both results and endeavour.
Evidently, this is not the only OTE system to remunerate your sales team, there are those based purely on salary, others exclusively on commission and the mixed approach that I propose. Each of them should be adjusted to the commercial needs of individual firms, and varying market conditions.
See you soon and may your sales be good!