Trump card: could adopting a straight-commission system be a good bet for your business?

Entrepreneur, March, 2004 by Kimberly L. McCall

ARE YOU STRUGGLING TO FEED THE EVER-voracious payroll monster each month while failing to achieve the sales results you need? You're not alone: According to Deloitte & Touche's "2003 Strategic Sales Compensation Surrey," 54 percent of sales leaders aren't satisfied with sales force performance. And 52 percent of respondents think that when low performers aren't culled from the sales force, the lack of accomplishment acts as a "drag on aggregate productivity."

If you wish to bolster sales without adding much overhead, commission-only sales reps may be a good option. In the straight-commission model, your reps "eat what they kill," and you pay only for results. As with any compensation plan, it has both merits and snags. To gauge whether a strict pay-for-performance system will work for your sales shop, consider the following issues:

[check] Working with entrepreneurial reps: You're a risk-taker, so why not engage reps with a healthy appetite for daring? According to Michael Herman, principal for Deloitte's Human Capital Advisory Services in New York City, "A commission-only plan will attract the most aggressive and self-confident sales personalities because they like the high potential earnings and relative independence." Expect to draw exceedingly talented sellers capable of posting big numbers.

[check] Weeding out the weak: Reps on straight commission will be seasoned, hungry and motivated. The compensation model "weeds out the weak salespeople pretty quickly," says Andrew Cagnetta, 39, CEO of Transworld Business Brokers LLC in Fort Lauderdale, Florida. Cagnetta's business brokerage company will use 35 straight-commission reps to write a projected $4 million in sales for 2004.

[check] Finding commission-only reps: Many of the techniques for doing so are the same as if you were seeking base-plus-commission reps: networking meetings, industry contacts and headhunters. Herman says one twist is that you'll attract only a subset of all sales reps, so "expect a few more declines than a more general search would produce."

Joe Takash, president of Victory Consulting and a sales speaker and coach in Chicago, adds, "Make a commission structure generous enough, and thy door shall forever be knocked upon."

[check] Setting up a commission structure: Arriving at the right percentage for reps will take some legwork. Herman suggests researching pay levels in your industry to set a base line. Then you'll need to assure that you'll still make a profit after the rep gets his of her cut. Cagnetta, for example, pays reps 50 to 70 percent, based on production each calendar year. Be aware that compensation costs can vary greatly from month to month.

[check] The potential dark side: The cons of going straight commission include a pressure-cooker stress level for reps and selfish reps unwilling to engage in team building. Cagnetta adds that it's not possible to hire young talent, as the greener reps "don't have the resources to last through the start-up period."

And since reps working on straight commission tend to be aggressive and self-confident, they "may view themselves as free agents and dislike too much company interference," warns Herman.

[check] Retaining high-fliers: Minimizing sales force turnover is an issue for any team, and may be especially pronounced for pay-for-play reps. Takash explains that it's always difficult to keep reps because it's a "high-stress, high-paying, burnout job in many industries." He adds that a fair and generous commission structure will help minimize employee churn.

Cagnetta has had good luck keeping his reps because he places special emphasis on making Transworld a great place to work: "Our family and team spirit, coupled with growing opportunity, makes reps want to stay."

KIMBERLY L. McCALL (aka Marketing Angel) is president of McCall Media & Marketing Inc. (www.marketingangel. com) and author of Sell It, Baby! Marketing Angel's 37 Down-to-earth & Practical How-To's on Marketing, Branding & Sales.