Compensation: Base vs. “At-Risk” – Security vs. Opportunity
Posted on September 14, 2016 by SnapDragon Associates
What motivates you? Security or Opportunity? … All of one or the other? …Or a combination? …And in what concentration?
If employers could answer these questions about their associates as individuals, in concert with their Business Model, and acted responsibly, productivity would soar! I’ve seen all shades in the spectrum, from straight salary, to 100% commission. There is not one clear answer for each job description or for any two individuals. Setting compensation structures relies on the industry, the market segment, the product or service, and (believe it or not) the individual and what motivates him or her.
When it comes to sales positions, I’m leery of both ends, and have found the greatest success in the “in-betweens.” A straight salary, while potentially motivating some, is likely to produce less than monumental results for the company or the associate. Straight commissions similarly can have inconsistent results.
Why? Let’s state the most obvious one first. Salespeople are competitive by nature, and a straight salary fails to reward superior performance. It can also severely overpay weak or unmotivated individuals. Straight commission rewards supermen handsomely, but grinds up and spits out many others…even as they gain momentum, experience, confidence, and results. What’s the fallout? Turnover…and turnover is expensive, unless that’s what your business thrives upon!
So are there situations in which the extremes are appropriate? Yes. For the journeyman professional, a straight commission can be best for everyone. He can make an “uncapped” income, and the company wins with every hurdle he clears along the way. For someone getting started, unless they have resources to carry them through, this can be the express-train to failure and wash-out. (Some Industries take advantage of this while others pay a high price for re-training and turning-over associates).
Straight salary will benefit the starter, but hold him down as he gains momentum. The cost associated with replacing one of these guys is even greater than the last example. Just imagine having to replace salespeople as they are finally beginning to become producers!
Where is the answer? As usual, it’s found somewhere in-between the extremes. The balance is the art form. The correct mix is the one that keeps the strongest team members aboard, and reduces the frequency and excessive costs of turnover.
Need advice on your specific environment? If you haven’t adjusted your program, or added some individual tailoring, you probably do!
Written by: Geoff Keifer, Regional VP
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