Commissions Create The Wrong Behavior

"Every result in your life and in your business has a system that is perfect for creating it. If you want to change a result you have to develop a new system."

-Steve Chandler

I know this is heresy to most people but it is true.

I was meeting with a client recently and the subject of sales came up. He has 4 sales people, 2 that have been around and are his "All Star" guys. He has two newer reps.

We were discussing an integrated marketing campaign and how it was going. It involved sending out 15 postcards per week, per territory and the sales guys were supposed to be following up on the mailings with an offer.

He said the younger guys are really "kicking butt". They are having great success, over ½ of the calls are resulting in identifying prospects and maybe ½ of those have accepted the offer and are moving toward a sale. Great news!

Now for the twist. He said to me, "Rick the problem is my All Star guys are not doing it. I am going to have a sales meeting tomorrow and have the younger guys talk about their success and maybe that will get the All Star guys to catch on and start doing it." I suggested that will fail too. I ask what percentage of the guys compensation was commission? He said about 75%. I asked what quota or goal do the All Star guys have for the year? He said to grow 10%.

So we discussed what was going on. Everyone gets to a point where they are making "enough" money.

"Enough" means that other things (time off, not doing things that are uncomfortable, etc.) become more important than money. With that in mind let's look at what is happening here:

1. These guys have been around, built a territory, and are making enough money so that other things are more important. They hang around the office too much, make a route of old customers, spend maybe 2-3 hours of that in conversations with customers and prospects.
2. They have agreed to grow that territory by 10%. Well, prices were raised 5% this year so now all they have to do is keep doing what they feel comfortable doing, seeing all the old customers and they will grow 5% due to price and more as their customers grow organically. They will then follow up on a few leads (once or twice) and breakthrough that 10% quota with ease.
3. There is no compelling reason to do anything else. Since 75% of their comp is commission they are going to make 5-7% or so more than last year. They feel independent - "I can do what I want or not do things the owner wants because it is skin off my back. My decision to not pursue new customers or play golf today cost me money, not the owner."

Think about it - all your other employees get a salary. You have an agreement that for that salary they are accountable for certain results and for doing things "Right". In other words, this is when we start the day's work, here is the process, here are the results we want to achieve, etc.

But salespeople get commissions and that alone creates this feeling of independence. They think like owners, but of their own fiefdom, not of the business.

Switch them to a salary, based on last year's total compensation and get agreement on a 15% growth plan with bonus when they achieve it. Then get agreement to follow the processes and the results you want to see.

Next step, bring in a sales coordinator to take on the tasks like inputting into CRM, owning the follow up and paperwork, setting appointments and driving the activity of these guys. Increase their face time, in conversations and expanding their customer base to 6-7 hours a day. Clients are increasing sales by 2X at 3/4 the costs with this process. 

All the best, 

Rick Wallace