Jobs are so scarce right now, and employers are so hesitant to outlay capital, that the standard default worth of any given salesperson is straight commission.

Go out and sell my stuff for me, and I’ll give you a piece.

It sounds nice in theory; performance based pay means you’re not carrying any dead weight paying for producers who don’t produce.  The entire amount of compensation is left up to the salesman’s drive, diligence, and hustle.

But that’s not all it takes to make a sale.

  • Quality of the company
  • Quality of the product or service
  • Price (at a point the market can bear)
  • Name/brand recognition conveying comfort and trust to the buyer

These are all things that the salesperson does NOT control.  Regardless, they make or break many sales (if not most).

If sales was all about how many times you could dial a phone in an hour, then the quickest-fingered telemarketers would be the best compensated.

Salespeople bear all of the risk in a straight commission arrangement.  If the product sucks, or the company reputation is lousy, the salesperson is still compensated on how well they fight uphill against this.

Make a sale, make a buck.  (Or not.)

This leads to incredibly short term thinking.  When you are aiming for the short term sale, you might make a buck.  But by neglecting the long term relationship, brand to buyer, there is a disservice done to both the salesman and the company.

Long term relationships are best for the customers (they dont have to keep comparing competitors all the time), the best for the company (they gain reliable, long-term repeat buyers), and the best for the salesman (more sales, more referrals, an easier and more lucrative career).

But you know what?

You can’t make long term relationships on short term compensation.

When you incentivize immediate performance, there isn’t time to build networks, credibility, and trust.  There’s only time to pitch and close.

Hiring a salesman on straight commission, with no medical benefits for 6 months, no salary until a book is built, and no time to learn the product or company thoroughly, means you’re going to get shoddy salesmanship.

And you know what shoddy salesmanship leads to, right?

Low sales = Low revenue.

Companies are getting poor results from their poorly compensated sales staff, and they think, ‘Why should I invest time, money, and effort into these layabouts?  They’re not producing sales!

Salespeople, in turn, cannot feel committed long term to a job that is not making an investment in them.  If sales are down next week, guess who’s not getting a paycheck?  The salesperson bears all of the risk.  The company, receiving little reward, is unwilling to take more risk from an underperforming sales force.

Nothing happens until a sale is made.

And when sales aren’t made, and money doesn’t move, we get a sluggish economy.