Many sales organizations and sales managers, have had great success offering high commissions and letting salespeople sink or swim.
While this approach works for some highly-self-motivated salespeople, it is scientifically proven to not be a method for getting the most out of employees. So it’s actually not a strategy for maximizing resources, not for maximizing efficiency and not for maximizing sales.
Any sales manager who’s ever run a team of commission-only sales people knows there’s a high burn rate on the staff. You may have to hire 10 (or more) people to find 1 good one. Unfortunately, your organization probably needs more than 1 good salesperson to reach its ultimate sales goals. And as a sales manager your time might be better spent helping make the sales organization more succesful than spending all your time hiring and firing.
Furthermore, living with the constant up and down of sales people who don’t work out is not the stable business model most organizations desire.
Another approach — grounded in behavioral science — exists.
This adds to the commission a few other non-monetary rewards that are scientifically proven to get better results than money alone — no matter how much.
The fact is that people are social animals. We respond to social incentives. This response can sometimes be economically irrational, meaning people will frequently value a social reward more than a monetary reward of equal value — or often will even value the social reward above a monetary reward of much greter value.
This means that if you are not using non-monetary rewards with your salespeople you are not getting the best out of your employees, you are also likely paying them more than you need to.
If you don’t believe me, here’s the science behind this phenomena of behavioral economics as explained by the genius Duke University professor Dan Ariely: http://bit.ly/1gjW3Se
Now, once you understand this, the next question is what kind of non-monetary rewards should you use? The answer is: praise and incentives.
And how you structure your praise and incentives is also very important.
But that’s for another blog.