One of the many topics that I hear the sales community discussing is how to pay salespeople and what the ratio of base salary to commissions should be to create the on-target earnings (OTE). What then is the motivational impact of a lower base salary base vs. a higher base salary for the candidate? I have been listening to and coaching salespeople who are in the interview process, and it is fascinating to me what I hear. One strongly expressed view is that a lower base means the company does not value sales. Conversely, I have to talked to many higher-level people making the hiring decisions and the view is equally strong that the sales community should not care what the salary is; they should be worried only about the total package (OTE) because we are commission driven. Two very opposite viewpoints, which don’t necessarily drive motivation. There are, of course, those who see some middle ground as well.
I, for one, have been espousing the philosophy that we are skilled practitioners. Selling is an Art. We bring a huge amount to the table and should be compensated as such. The greatest products in the world stay on the shelf without great salespeople! In our world, compensation is not just salary. That’s the nature of the beast. Many sales professionals are in this because of the commissions! If you are in sales just to make a salary, you might want to rethink your career goals! On-target earnings should include a salary that reflects the nature of the sale (simple or tactical), the skill and tenure of the person selling, and the complexity of the products and services being sold.
Fueling this debate is some philosophy and the “rules.” I noted above that there are those who feel that philosophically, salespeople should not care about salary and that it’s all about OTE. This philosophy can be a challenge because it might fuel the demotivating perception in the candidate’s mind of sales not being valued.
Now for the “rules.” Companies do benchmarking about what people are making and (hopefully) pay accordingly. As a hiring manager who has hired many salespeople, I was often frustrated by what I was told were the salary ranges of what we could pay. We all knew it would not attract the right talent, but there was no answer. Sometimes, people want to pay only so much. You get what you pay for. Sadly, being “penny wise and pound foolish” in compensation is not uncommon.
At the end of the day, talent still has to be attracted to your company. Is a 20-year veteran with a successful track record going to come to your company for an entry-level or mid-range salary – despite an aggressive OTE package? Can the great candidate balance risk and reward to make the move? I know of many hiring managers who believe that when you find talent, you (within reason) pay for it. The philosophy here is that they believe that sales is a skill that merits compensation that sends the message that “we value you and what you bring to the party.” It also sends the equally strong message that “we are paying a premium for you, so you better deliver.” That’s cool, we are up for the challenge. In these cases, the sales function is seen as integral to the company and not tangential. I will remind you that you better be pretty dang good to have this happen. It’s also very motivating.
6 thoughts on “The “Great Salary Debate””
Spot on! Sales professionals should be naturallly competitive and driven to succeed by whatever parameter or metric is descibed. It’s the pride of doing a job well and doing it better than others.
However, above all other measures of success should the outcome of the sale, a satisfied customer who truly believes that you as the sales person brought VALUE to the front of the sale. If the sales person is only in it for the compensation and cares less about the customer, than it’s impossible to call this person a sales “professional”.
My philosophy on compensation has always been to pay the best so well that they can’t afford to leave and pay the others such that they can’t afford to stay. When we can get to the point of paying sales professionals based on the outcome of a satisfied customer (however that can be defined) we will have moved the profession to an even higher level.
I agree with the statement “pay the best so well that they can’t afford to leave and pay the others such that they can’t afford to stay.” A great philosophy! Thanks and Good Selling!
Todd – great topic. As a sales professional, I focus on both OTE and base. OTE is the more important of the two, but not by much. And the reason is internal credibility and power.
Imagine two sales reps. One has a $60k base, and the second has a $120k base. The rep with the higher pay grade is going to have more credibility with internal executives when it comes to meeting customer requests/demands. Selling internally is just as important as selling externally, and a higher pay grade is an important tool in the internal sales cycle.
Also. pay raises are given as a precent of base, not OTE. Over time, this mounts up to some significant money.
Ron Wickline, great point on the customer. Part of my goals and compensation in my current position are evaluated by my company’s CSI, Customer Satisfaction Index. So I’ve seen my company try to embrace this in some regard, with success.
Does anyone know of any sales compensation plan driven solely by something like a “CSI” as Ethan describes? I have had a few sales leaders ask me this and are experimenting with that idea…
Ethan Weiss, congratulations to your employer for taking a progressive approach to recognizing the ultimate outcome of a successful sale – a satisfied customer.
I like to think of customer satisfaction as a potential lifetime of income. If your product sells for X, the immediate return is only X. However a satisfied customer will keep coming back to purchase your product based on the trust in your relationship and of course the perceived value of your product. Thus that original sale of X can turn into many multiples of X over the years.
Companies will always have more products, but your customers are limited in number. Take care of them and they will take care of you.
Congratulations and good selling,