Just a couple of quick thoughts on compensating salespeople prompted by a recent experience with a manufacturing start-up...

Classic compensation scenario of the 100% commission car salesperson.  Under this pay arrangement the salesperson receives commission only when they sell a car (i.e. sale completion).  Good deal for the employer...right?!  No sale = no commission = no sales costs.

In reality this is a very poor management practice -- most salespeople in this scenario will simply hole up and wait for better times.  Few sales are made and the employer can't cover the fixed costs of managing their business.  The company blames the economy and goes broke.

The reality is that many 'Pay for Performance' plans such as these focus too much on outcomes.  In many instances I prefer 'Pay for Behaviour' plans where the salesperson is compensated for doing all the right things on the premise that this will lead to positive outcomes.

For instance, in the car salesperson example above -- pay commission for contacting a former customer, making a new contact on the dealership floor, writing up a quote, making the sale, and any follow up activities.  Pay commission at each step in the process to encourage positive sales behaviour.  Where I have used this approach the salespeople have become much more active and engaged -- particularly when the sales environment is poor it is important to do everything possible to attract whatever buyers are out there kicking the tires.

And remember...when the economic conditions improve where are customers going to look when they are ready to buy?  With the salesperson who was always there to serve them or with the salesperson holed up in the office?

If your salespeople aren't performing it's possible that your paying them to do exactly that!