2Review Your Base Salaries The most common pay mixes for sales representatives are 60% base/40% commission or 50% base/50% commission. Current high inflation rates, rising costs of housing in many metropolitan areas and the highest gas prices since 2008 may mean that base salaries are no longer competitive. And salaries are going up. According to The Conference Board, overall wages increased faster in the third quarter of 2021 than at any other time since record keeping began. The Conference Board and Society for Human Resource Management project salary increases of 3.8%- 4% for 2022. For high demand occupations in high growth areas, however, wages could increase by 6%-8% as the economy opens further and grows. It’s not uncommon for organizations to set base salaries for sales reps and then not pay much attention to them. Now could be the time to review base salaries to stay competitive as you recruit new reps and work to retain your current sales force. 3Don’t Forget To Pay For Business Development Finding customers takes time. By definition, business development is a long-term, strategic process that can focus on development of newmarkets and/or products. In large organizations, there are often individuals or even teams who fulfill the business development role. In smaller organizations, however, the sales repmay be responsible for business development activities that require time commitments that lengthen or alter the sales cycle and result in less direct influence over customer buying decisions. If that’s the case in your organization, youmay need to adjust your paymix to recognize the importance of business development and the amount of time it may require. 4Keep It Simple Commission plans for sales positions can be incredibly complex. If you’ve done some research onmodifying or enhancing your own plan, you’ve most likely encountered terms like tiered, ramped, hurdled, or clawback. All of these plan provisions can and dowork well. Their complexity, however, requires more complicated administration and the ability of your internal systems to accurately track sales and related data. Simple works very well, especially in smaller organizations. Two plans that are common and can be effective are the gross revenue commissionmodel and the grossmargin commissionmodel. The gross revenuemodel is constructed simply. It states that if a sales rep sells a product or service for $X, they will receive a flat percentage in commission. Thismodel is particularly effective in organizations that seek to expand their market share or enter newmarkets. The grossmarginmodel is similar in construction. Instead of focusing on total sales, however, the focus is on profitability. Under thismodel, sales reps receive a flat commission percentage of the amount of a saleminus the expenses associatedwith that sale. For example, in an organization using a grossmarginmodel and paying a 10% flat commission rate, a sales rep making a $10,000 sale with $4,000 of associated expenses would receive $600 (10% of gross margin/profit). 5Consider Ditching the 100% Commission Model Recruiting and retaining sales reps in 2022’s extremely competitive jobmarket is a challenge for every organization. If your pay plan is structured as a commissiononly plan, expect a particularly challenging year. Consider the following: • First year turnover in commission-only positions is often as high as 90%and competition for sales reps is fierce. • A survey conducted by U.S. News &World Report cited Sales Rep as one of the 10 worst jobs for millennials. The top reasons? Lowwork-life balance and above average stress. Millennials currentlymake up 35%of the U.S. workforce. • Although 100% commission plans are heavily used in insurance, real estate and other industries where one or two customer contacts yields a sale or no sale, they don’t work well in industries with long sales cycles or in organizations where significant business development activities are part of the sales role. Palé is a contributor for Affinity HR Group, Inc., PPAI’s affiliated human resources partner, which specializes in providing human resources assistance to associations, including PPAI and its member companies. www.affinityHRgroup.com. AffinityHRGroup doesn’t have any crystal balls for what the future holds, but we do have some ideas about how to be best prepared to meet whatever challenges may come. | JUNE 2022 | 55 THINK
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