Many companies make the mistake of offering a 100-percent commission compensation plan. Why? This type of plan minimizes their risk, as no sales made means no commissions paid. Besides, any salesperson who is any good should have enough faith in their own ability to work on 100-percent commission, right?
It doesn’t work that way. Any salesperson who is any good knows that it takes time to build an opportunity pipeline, regardless of how much experience they have or how robust their personal network is. They also know they will need to invest considerable time and effort in learning about their new employer and its offerings. They still need to pay their bills while this learning and pipeline building takes place. Not surprisingly, these talented salespeople usually choose to work for employers who are willing to make investments in them.
If you run an ad for a 100-percent commission sales job, what kinds of candidates can you expect to see? Usually they will fall into three categories:
Manufacturers’ Representatives: These salespeople work as independent contractors, not employees. Usually they sell a portfolio of offerings on behalf of multiple client companies. Make no mistake – these are mercenary salespeople. The amount of time and effort they will invest in selling your company’s offerings will correlate directly with the amount of return they feel they can earn on their investment. If other client companies offer more lucrative compensation plans, a monthly retainer, and/or do a better job of providing leads, don’t expect to see much activity with your company’s offerings.
Newbies: These candidates are exploring sales as a career for the first time. Because of their lack of experience, they may have difficulty finding jobs that aren’t 100-percent commission; or, they just may not know any better. They may or may not have the attributes required for success in your particular sales job (80 percent of them won’t), and they probably don’t have the first clue about how to build an opportunity pipeline. Still, they may be willing to come on board and grind away for a few weeks. However, if they don’t luck into some early sales, chances are excellent that they will drift away and look for an employer who is willing to teach them how to sell and pay them something while they are learning.
The “Other 80 Percent”: It is rare for a salesperson with talent and experience to consider a 100-percent commission sales job. If one does, it is even rarer for them to be one of the 20 percent of salespeople that produce 80 percent of sales. Usually it will be someone from the 80 percent of salespeople that produce 20 percent of sales. Perhaps they are making a last-ditch effort before giving up on sales. Perhaps they need to be able to say they are employed while they search for another job. At any rate, the chances are poor that one of these salespeople will ever deliver more than mediocre performance.
Another challenge unique to 100-percent commission compensation plans is that the employer loses the ability to hold salespeople accountable for administrative activities. These activities include attending training sessions and meetings, working from the office on specific days, or updating the opportunity pipeline in a timely fashion. If a salesperson doesn’t do what the employer asks, so what? What have they got to lose?