Commissions are still a popular tool used by management to motivate employees to perform better or to reward their (extra) efforts, especially in sales environments.
The same rules apply to most salespeople (X% fixed salary + Y% commission on sales).
But are they all equally motivated? Does every salesperson really have to be paid according to their sales or is this more of a tradition that has just been adopted from Business 1.0?
Monetary compensation systems have been proven to work for simple, routine tasks. But today’s business world has become so complex that simple tasks hardly exist anymore.
Why not ask your employees or colleagues if their work is complex?
It is undisputed that there are good reasons to pay salespeople based on their performance, especially in B2B sales, but does this additional – mostly monetary – incentive really motivate them as intended?
Are sales employees individually asked what would motivate them to perform better?
Usually not. But what if for some, the lever was more vacation days, a much larger company car, financial support for kindergarten and school payments, or just more remote work? Some would also be motivated by the possibility of a sabbatical instead of monetary incentives.
All these benefits could be offset by various other factors. It’s extra work, but it’s definitely worth it. And if it’s about money, why does it have to be at the end of the year? Why aren’t payments also made per quarter or month to create a more manageable time horizon?
Use Corporate Vision
The tradition of automatic implementation of commissions with salespeople has to be questioned at the latest in today’s world. There will always be those who only optimize their salary through this special payment and do not act in the spirit of the company and its vision. This also includes a long-term perspective on the individual projects/customers and possible follow-up business that could be even more lucrative for the company.
It is more reasonable to pay an above-average base salary and make the variable part dependent on the company and/or departmental targets achieved. These could be sales and profits, but also compliance with defined budgets, participation in further training, employee management, results from the customer survey or individual projects or a specific goal defined together with the employee.
And please: The number of visits or customer contacts has to be removed from these conditions without any sort of replacement. All it does is lead to useless meetings and wasted time on the part of the company and the customer.
Additionally, a sponsored event can be very motivating for employees and their families. I have seen a successful company invite its employees and their families to a Center Park to celebrate a successful year or project and reward those involved. The obligatory flower bouquet for the spouse should not be missing! Spouses are still crucial for good and successful employees of a company. They will remember the recognition they received for years to come, not to mention the employees’ commitment to the company.
Learning From Others
But again: The sales department is not solely responsible for success just because it “brings home” the order. The entire company may or may not succeed. Therefore, it is appropriate to pay all employees in the company. This could take the form of a bonus payment for each employee, for example, no matter their position, but dependent on the company’s earnings (EBIT). This promotes entrepreneurial thinking and profit-oriented action.
Many companies in the automotive industry have already adopted this type of special payment. However, most other companies are still reluctant to take this step or reject it outright.
It would be easy to implement and also communicate, especially with employees who do not have an exposed position in the company, such as production employees. This would show appreciation and strengthen the sense of belonging, just as employees deserve.
It is important to realize that millions and billions of successful companies are not generated by their shareholders, but by their employees. Unfortunately, people still forget about this too often.
You are in control. Good luck!
See you soon.