May 23, 2013

Manager Wondering about Capping Sales person Salaries

Sales leaders have occasionally expressed to us a preference for capping a salesperson’s earnings.  The reasoning for such a decision typically goes “My salespeople shouldn’t be making more than me.”  Although we are not a sales compensation firm, we do know quite a bit about personality and how high-drive salespeople react to such a policy.  Here is why that approach can be dangerous . . .

Salespeople high in Drive, particularly need for achievement, are motivated by excellence . . . constantly raising the bar for themselves and their performance.  Although money is not their goal in and of itself, it is the means by which they gauge their performance . . . a tangible return on their hard work. . . like points on the scoreboard to a great athlete.  Like a great athlete, a high-Drive salesperson relishes the opportunity to outperform themselves and their peers.  But, imagine telling Michael Jordan before a big game that he would be “capped” at 20 points . . . and anything he scored beyond that level would not count.  Not the best motivator, is it?

Similarly, when given the choice between compensation via salary vs. straight uncapped commission, established, high-drive salespeople will choose pure commission.  They prefer the opportunity to put unlimited points on the scoreboard much more than a safe, but ultimately less fulfilling return on their efforts.  Critically, these uncapped salespeople, free to work and earn as much as possible, also grow revenues for their company.  So, business owners should be delighted that their commissioned salespeople are making more money than them . . . they are strengthening the performance, and, ultimately, the value, of their business.

Dr. Christopher Croner and Richard Abraham are authors of “Never Hire a Bad Salesperson Again” and developers of the proprietary and patented sales test, The DriveTest™, for Sales Candidates. For more information, click here.

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