This year COVID-19 certainly has had an effect on the distribution sector and forced businesses into changes we never expected. This is especially true in sales. As the roles of the inside sales and outside sales team continue to get tweaked, the age-old discussion on sales compensation models has begun once again. The inevitable evolution of technology, customers, and the competition means that each of us needs to be adaptable and receptive to change in order to keep our businesses healthy.
SALES COMPENSATION OPTIONS
Commission versus no commission has always been swirling around in CFO heads. What is more effective? What are the motivators, risks, and rewards? Which sales compensation model fits today’s business climate best:
- straight salary?
- salary, and commission?
- draw versus commission?
- salary and bonus?
- straight commission?
This year has changed the way a lot of commission-based salespeople think. Our managing partner, John Salvadore, is a former distribution sales executive and has analyzed this topic many times. He is seeing a lot of changes both from the candidate and client viewpoints.
In the past, sales commissions were the desired option. Sales reps were all locked into their account bases, had great relationships, and business was freely transacted. A salary-based sales role was not attractive. Now he’s seeing sales compensation-based modeling becoming part of the conversation whereas, in the past, less than 25% of clients were receptive to discussing it. Most clients were locked into their current plans and not open to discussing new compensation solutions. How things have changed!
THE IMPACT OF 2020
For most of this year, many sales reps have not been allowed into industrial plants, and have had very limited in-person interactions with customers. Sales methods have changed, making sales tougher – especially in bid/spec business.
With business starting to rebound, most companies see themselves as slightly down or flat for 2020. That indicates a strong second-half recovery over a dismal first half. With conditions improving, companies that slashed workforces will be hit with increased levels of business with far fewer employees to take care of servicing customers.
According to a survey done by Channeling Marketing Group, over 25% of distributors and manufacturers that responded say they are looking to add sales personal in early 2021. Changing your sales compensation model does mean taking on an extra fixed cost, but the results can pay for themselves!
WHAT SALES PROFESSIONALS WANT
Companies that are providing the security of stronger base pay with some sort of variable bonus and/or profit-sharing have become much more attractive to candidates. COVID19 has made many sales reps feel the pain of not being in a position to sell and that means no commission check. Candidates are looking for more security, stability, and company commitments. Benefits have taken on more focus.
WHAT CAN YOU DO TO HIRE/RETAIN TOP SALES REPS?
As restrictions on businesses and individuals are being lifted, companies are now in a better position to change their sales compensation structure. The risk/reward is being shared more and finance executives can budget their selling expenses more accurately by moving to more salary-oriented, fixed cost pay structures.
What we are seeing:
- Companies offering more guaranteed salary with a much lower commission/bonus structure
- Candidates who have been on a commission heavy comp plan where they made higher wages, more open to a compensation package that allows them to budget month to month versus the peaks and valleys.
We believe this trend will continue beyond the pandemic. It may not be widespread, but employers will look at this fixed expense more favorably after having such fluctuation with their variable compensation plans. Even though making base pay higher adds more fixed costs to a sales budget, the reward to employers is the ability to budget expenses more accurately. This will (potentially) ensure that their team is happy, secure, and in place for the long term. It protects the employer’s investment in people and could save money over the long term when businesses get back to full strength. Flexibility in compensation plan structure may be the key to the future.
Being in a position to offer options could be attractive to candidates – remember, one size may not fit all!
If you have sales roles (or any others) that you need to have filled, contact us and we can discuss how we can complement your recruitment efforts.
Contact us:
John Salvadore
info@grncoastal.com
508-589-6022
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