Black Sales Journal

The most important aspect of a sales job is getting paid.  In the end it is about that paper! I am not talking about the money type of paper; I am talking about the written remuneration or compensation plan.  That is the most important paper out there.  Getting paid is important; as it is one way to keep score, yet it is also the way we eat and keep our families happy.

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The objective of this post is to give those who need to know a basis to understand the basic remuneration systems in an easy, no nonsense way.  What is more important is that you learn your company’s system and “work the hell” out of it.

Remember, it is your right to work the system, yet also, it is good policy on your part to keep your activities in the spirit of the system as well.  Working the system is not cheating, and if you are within the spirit of the system, and you will still get your reward.

An important note for all remuneration/compensation stakeholders is that whenever commissions are involved, care must be taken to realize the volatility that can exist.  Sometimes this uncertainty is beneficial (higher earnings), and sometimes it can be detrimental.  In the end, as I said, it’s about the paper, but also the confidence you have in the company’s products and your own abilities.

7 Major Types of Compensation Methods

Companies have the right to do whatever is legal and makes sales happen.  They can put together a variety of different types of plans that stimulate gross sales, retain sales professionals, promote particular products, develops territories, etc.  There are significant numbers of Black sales professionals in each of these type of arrangements with many prospering.  Your ability to take downside risk will determine how you feel about these.

Having been involved in the design and approval of compensation plans from a company standpoint, much thought goes into them, as once they are out there, they you are stuck with them for the prescribed term.

Here are examples of the most popular and widely used plans:

Salary – You have a simple formula to operate under, yet no incentive to excel other than a performance review.  Salary is safe and secure with no upside.

Straight Commission – No base salary, no upside limit, and the downside can be “$0 dollars”.  The risk is with you, yet if you excel, and you must to work under this system, the “force” is with you.

Draw Against Commission - In this one, you have some subsistence in the form of a ‘draw’ providing an advance of commissions with an agreement to pay it back if you do not ‘earn’ it.  The employer is essentially loaning you money against your commission income.  You get the benefit of some subsistence but still have the risk of an downside and the benefit of an upside.

Salary Plus Bonus – A pay system sought after by many professionals as it provides a solid floor, while providing significant upside earnings paid periodically, often quarterly as a bonus.  Often using the components of a straight commission system to help determine the bonus amount.

Base Plus Commission – Similar to above, this is a popular method, tried and proven.  Fixed base salary with commissions paid on the system quarterly or more often.  Commissions are usually based on percentages of dollars sold.

Variable Commission – These are straight commission schemes that have percentages that vary with product, size of the sale, attainment of goals, etc.  Much depends on what the company is trying to promote.

Residual Commission – Commissions that are paid based on customer longevity once initiated.  Aggregate residual commissions can form a solid ‘base’ which provides a good income, and some stability.

There may be other methods of compensation, but usually it is based on some variation of one of these arrangements.  In almost all cases the compensation plan is in writing, and available to all sales professionals for study.  Don’t forget to study this item and even have discussion with some of the more experienced sales professionals in your sales unit.  You will want to know the nuances of this plan that makes for higher earnings.

How Much Guts Do You Have?

Obviously these different arrangements involve different risks.  Hands down the straight commission set-up involves the most risk and highest instability.  It is sales compensation in its purest sense.  You sell and you get paid! I never worked nor managed in a system like this, and recognize that many of you do.

There are combinations of these elements that make for remuneration systems that need the ability to emphasize particular objectives.

Example 1. A salary + bonus system that wants to reward customer longevity attaches a component which uses residual commissions to strengthen the bonus.

Example 2. A variable commission changes your percentage on sales of a certain product based on reaching a certain level of sales.  Let’s say you receive 8% commission on the first $100,000 of sales of widgets, which increases to 12% for all sales thereafter.  Once you reach the 100,000, you are rewarded with more from your great work.

Yes, It’s About that Paper!

I would make the suggestion that you get your organization’s sales compensation plan in front of you and study it.  Do the brief interview with your sales comrades to determine how to maximize it.

There are times that the organization’s objectives, and the compensation or remuneration plan are not in concert.  Rewarding the sales of products that are not profitable, or are in low supply are examples.

Know the plan and formulate your objectives and you can work efficiently and effectively by maximizing your efforts and your income.

Be effective!

It does not matter what race, ethnic group, or color you are, there is always the possibility of  this injustice, which is totally legal. You may think it is less prevalent now, but be assured it still happens.  It happens to all ethnics groups, and certainly women. The customer can buy from whomever they desire! I give my episode in realization that when and if it happens, you might be looking for an ally.  Read on…..

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Sales will continue to be a difficult, but rewarding position.  We have had an opportunity to cover issues regarding the Black sales professional, the customer, and the employer, and their interactions in the course of business.  This is a complex relationship.

The effects of the 3Ps often have a role in the relationship.  For a refresher, the 3Ps play into the relationship in varying degrees; sometimes just below the surface, and sometimes playing a much more prominent role.  Today we will cover the reaction of the employer when prejudice rears its ugly head in the customer relationship, and how you might be affected.

The 3Ps Revisited

The 3Ps represent the untold in the workplace, beliefs, attitudes, and practices that can make it more difficult to succeed.  I will draw from the Inaugural Post of Black Sales Journal 11/2010, when they were first discussed.  Specifically, I termed it the “X” factor.

The 3Ps are:

• Perceptions
• Preferences
• Prejudices

Perceptions are hard to change, yet they are based on ones background, mindset, and their seat in the arena of life.

Preferences, quite simply, are what a person leans toward in their relationships, where their comfort level lies.

Prejudices are deep, often fueled by perceptions and one’s past, are deep enough to be actionable and problematic.

We went on to talk about the effect of these on your customer in Black Sales Journal – Preference, Prejudice, Perceptions and Your Customer).  This post covered how you can work with your customer when one or all of the 3Ps are evident.

The most striking statement in the post was that of the elements of the 3Ps, the most insidious is Prejudice. It is the most problematic of the 3Ps, mainly because there is little that can be done about it. Take a moment to review The Inaugural Post of Black Sales Journal and you will see that when it comes to the customer and the 3Ps, prejudice has little or no solutions.

When Prejudice Rears Its Ugly Head

There is always a possibility that a new sales relationship can go south because of prejudice and its effects.  When and if things go wrong, you will be faced with being in a ‘sandwich’ between an employer who wants to satisfy a customer, continue to reap revenue, and hopefully, wants to support their sales professional.

Your employer’s reactions will obviously be affected by his or her own 3Ps, and you should expect that will be a factor (Black Sales Journal 12/30/2011 Preference, Perceptions, Prejudice, and Your Employer).  As a matter of fact, Prejudice sometimes is unmasked when customers and prospects are handed out to a Black sales professional.  No one has an idea of how receptive the customer will be to the new relationship unless the customer has made statements or taken actions that reveal it.  I would rather see this distribution of business to the Black sales representative than have the employer avoid giving them the best prospects to others in anticipation of a negative response.

When the customer reacts unfavorably, you will get an education, as you will get an opportunity to see whether your employer stands behind you.

An Real Example

I was a sales representative in B2B sales who was assigned an account to service and hopefully sell additional business.  I was more than willing to accept, and take a chance on, any reassigned account, as it was a way to increase sales revenue.  I needed the account badly.

The account was medium in size, and although complicated, well within my capabilities as a sales representative.  After much preparation I made my first visit to the account to make my introduction and discuss a change in pricing on the account.  My sales manager accompanied me on the call as making changing pricing at that time was a touchy issue.

After the introduction it was obvious that the call was not going to be warm and fuzzy.  The customer, who was an older individual, sat motionless with a foul expression even before the increase in price was discussed. Once pricing was discussed, the customer slammed his hand down on the desk  and said, “This is bull _ _ _ _ , you are trying to put me out of business!”.  “I will not accept this!  Get the hell out of my office!” he ranted.  We made a feeble attempt to explain the pricing but were told again to “Get out now!”

We gathered our materials and made a hasty retreat.  The buyer followed us through the open office, full of his employees, ranting at us.

On our drive back to the office, my manager and I discussed the call and it was obvious that neither of us expected the reaction, price increases were happening everywhere and ours was modest compared to others.

Upon arriving at the office the Regional Sales Manager (my sales manager’s boss) called me to discuss.  The customer had called him and advised that he was ticked  and that they were going to move their business if a change was not made.   I told the Regional Sales Manager that I had done everything possible on the pricing.  He said to me “It is not the pricing that he wants to change, he wants you off of the account.  He advised that he was not going to work with you based on your race.” I knew from the conversation that he was sparing me the actual comments made.

Then came a statement that changed my life.  He indicated that he told the account that if that is the way you feel, “He is our sales representative, and if you work with us, you will work with Michael.  If not, we will, at your suggestion, terminate your account.” The account ‘fired us’ later that day he indicated that he was moving his business and never would return.

It was a modest loss of business for my company but a huge boost in my confidence.  My company had stood behind me!  Quite frankly, I appreciate what the sales manager did and I will never forget it.  There is no greater endorsement of a professional than to have the support of their employer.

Conclusion

I know that this example is unlike others, yet in backing a business resource, a devoted employee, I tend to think that the employer made out well.

Every situation and every company are different.  When I managed sales professionals, my actions had a sympathy to the sales professional involved as well as the customer.

Lesson learned:  Customers are always important, but the customer is not always right!

I appreciate your responses. You can reach me at Michael.Parker@BlackSalesJournal.com.