A Unique Sales Compensation Structure That Increases Retention
Every commission-based sales company faces attrition with sales reps. One of our jobs as leaders is to try to create careers for people and keep them at our company longer.
I believe there are four pillars of happy employment: money, culture, advancement, and autonomy.
Managers often look at advancement as a need to promote somebody. But, what I really think people are looking for is mastery or advancement in their chosen field. If they feel as though they're getting smarter, they're making more money, and they're progressing themselves career-wise, that’s just as powerful as a promotion in a traditional sense.
This compensation structure has been an immediate help on retention within our sales team. Being able to show reps a path where they can constantly increase their standing and their pay is a big deal.
We live in a world of instant gratification. There used to be a bit more patience when it came to advancement. People were committed to working in companies for four or five years before they moved on. Now, what makes retention a little more challenging is that you have to show advancement opportunities much sooner.
A New Kind of Sales Compensation Structure
So, we at Homefix instituted a three-tiered program for our sales team with extra benefits at each level.
Everybody starts on tier one as an associate. It’s an introductory level where each sales rep goes through a basic training process and has a set commission. When they reach one million dollars in sales, they move up to tier two and earn the title of consultant.
It’s performance-based, but there is no stipulation on how fast they need to get to a million dollars. So, it not only encourages people to perform but also to hang in there if they’re not wildly successful right away.
When consultants reach three million dollars in total sales, they move up to the third tier and earn the title of senior consultant.
Listen to Nick Roberts discuss the benefits of his sales structure on the Rock Stars or Remodeling podcast:
Increased Perks for Sales Reps
As sales reps move from tier to tier, we give them extra perks at each new level. We stipend people at higher tiers to give them the feeling of consistent pay. Once they receive any given stipend like having gas or phone expenses covered, they receive it for as long as they’re employed as a sales rep with us. We also give our reps a customized Rolex when they reach seven and a half million dollars in sales.
As reps progress through the tiers, they want to get to the next level as quickly as possible for even more guaranteed pay and perks. They don't have to become a sales manager or a vice president to make more money.
Big Benefits for Our Business
This tiered system also helps us hone in on who our future leaders might be. Every company should have an idea of who its best prospects are for future leadership roles. By seeing how fast sales reps progress through these tiers, we can identify who those people are and begin working with them on things that we might look for from them in the future.
This compensation structure has been an immediate help on retention within our sales team. Being able to show reps a path where they can constantly increase their standing and their pay is a big deal. We're getting better performance because the sales reps are trying to reach the next level.
Overcoming Objections from Sales Reps
The main objection to this system would be the change itself. But, I don't see how it hurts. If there's no negative drawback to it, and it’s giving sales reps incentives to work towards, then why not attempt to put yourself in a better position to hold on to your people longer?
Everybody hates change, especially salespeople. They are creatures of habit. But if the change is framed in a way that makes them feel they're winning, then you as a business owner or sales manager can’t lose.
