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Pay Plans for Sales People
Posted to Shop Management Forum on 10/11/2013 26 Replies


I want to throw out an idea that I have regarding the pay structure for people in sales. This could be a service advisor, a car salesman, a widget salesperson, it doesn't really matter. Sales positions often have pay structures that are commissioned based with respect to the number of widgets sold and/or the net profit associated with the sale. In other words, you sell x number of widgets and/or net x number of dollars in sales, and we'll give you x-number of dollars in pay.

This has been the convention for, well, forever, at least my forever :o) In any case, I'm not a fan of commissioned base pay plans. Why? For one, various reports that I've read suggest that money in and of itself isn't an effective performance incentive. There are some who might argue that, and frankly they may have an argument, but let's forget that one, or at least shelve it.

My objection to commission based pay plans is that as a trainer and training developer I was taught that training is properly evaluated at four distinct levels. Two of those levels are behavior and results -- in that order (they're actually the 3rd and 4th levels). There's a reason for this… Results are directly tied to behavior. If you don't have the behavior right, you won't see the results. That makes sense, right?

Now, when it comes to results in sales we have a problem -- the customer. No matter how well the salesperson makes the presentation, the customer might (and often does) say no -- Not necessarily because the salesperson did a bad job, but for reasons outside the control and influence of the salesperson. So, is holding the salesperson accountable to the final result (the sale) fair?

Some of you may be thinking it may not be "fair," but such is life. There's a bottom line to consider -- no sale, no money, it's pretty simple. While that may be true, I'm thinking there might be a better way.

*IF* it's "unfair" to hold sales folk accountable to the end result (the sale), surely it IS fair to hold them accountable to the BEHAVIOR, assuming, of course, that they've been trained, have the right resources (tools), and are empowered. Yes, these are big assumptions, but these factors are relatively easy to discern, and for the sake of this discussion, we'll make the assumption that training, tooling, and empowerment are in place.

So my idea (finally :o) is to have a pay plan that rewards for adherence to the process (behavior).

Here's an example… Some techniques work better than others for converting calls to jobs in the shop. In general those techniques involve getting control of the call, qualifying the caller's concern, needs, and wants, developing a rapport with the caller, and asking for the appointment. There's a little more to it than that, and of course there are techniques within the techniques, but that's the gist. These techniques constitute the process or the BEHAVIOR, and this is what I'm suggesting the salesperson (in this example a service advisor) be held accountable.

In terms of pay (please note that I'm thinking out loud here and making this up as I go), I'm thinking along the lines of establishing a commission or bonus for working the process the right way.

Yes, this is takes more work to evaluate than just looking at sales numbers on a spread sheet. It requires observation. But isn't that part of a manager's job?

Again, as a trainer, training developer, and analyst of training outcomes, I've seen it many times where the results are less than hoped for. In other words, company ABC trains their people, but nothing much changes. In many of these instances it isn't that the training failed. It (the training) passed along the right information to the right people at the right time, and they acquired the necessary knowledge and skills. The problem is with the sustained implementation of those learned skills (the behavior part).

I'm just wondering, WHAT IF there was a direct relationship between the behaviors expected and pay? Would this incentivize people to work the process the right way?


Mark Hambaum
MDH Automotive Services
Richville, Michigan, USA

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