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Blog
Non-commissioned sales force: good or bad idea
February 11, 2008
Several months ago we featured an article on a distributorship in the Northeast that had eliminated commissions for its sales force. It’s worked well for this company and has led to the sales force-both inside and outside-to work more closely. And we heard from other distributors who were interested in the concept. An article in the Boston Globe also touched on the subject of a non-commissioned sales force. The article talked about a hi-tech company that had eliminated sales commissions. Describing why his company had gone in that direction, Mitch Little, vice president of the semiconductor company, Microchip, said: “The normal sales call has the customer mind-set of ‘tell me about your product, give me your lowest price and go away.’ We break down that wall. Once the customers understand that we really are there to serve, they start asking for our advice and expertise. We become part of the planning process-what are we working on five years out.”
To read the entire article, click here.
Posted by Jack Keough on February 11, 2008 | Comments (2)
In response to: Non-commissioned sales force: good or bad idea
rob commented:
We are a distributor of industrial electrical controls with sales around $5M and we have NO outside salespeople on commission. Our salespeople are on a bonus plan tied to company performance- the same as every other employee in the business. Our profit margins are significantly higher than our peers and, in 2007, the average employee in our company received bonuses equal to about 24% of their gross pay. Commission-based pay structures take too much time to track, are always subject to argument and don't specifically reward performance. Salespeople end up spending more time trying to make sure they get credit for an account than they do actually selling to the account. I think many companies move to commissions-based pay plans as a way of getting out of actually managing their salesforce. People don't manage themselves, no matter how you pay them. So, manage your people, pay them a salary and they will be more comfortable in their job and work as a team player.
In response to: Non-commissioned sales force: good or bad idea
Jack Keough commented:
Rob: Are those payments based on an annual basis or quarterly, for example? I assume annually. Is is based totally on profit and/or margins? And lasty, what is the reaction of your new hires when you inform them of your comp plan? It certainly seems to be working for you Jack