Commission-only sales plans are risky in my opinion.  I know they are the truest form of selling – you eat what you kill.  I simply think that many salespeople view this structure as a lack of commitment from the company.  I’m not saying that is accurate, but I have talked to many salespeople under these plans and this is their perception.

Fortune Small Business discusses this topic in their article Why to be wary of commission-only sales staff:

“If you hire someone and you’re not really willing to invest time and resources in them – and that’s really what a commission-only sales person suggests – then you’re missing an opportunity,” he says.

Good sales people communicate to prospects whatever makes your company special.

Again, the investment (or lack of) is the issue here.

“With the high churn rate of commission-only sales people, providing a position where there’s an equitable base and a reasonable expectation to succeed is probably less expensive in the long run,” she says.

Commission-only sales people who are just in it for the money “are the ones who will bail out first if hard times hit,” says Ross.

I’ve seen them leave before hard times hit.  The retention factor for these comp plans is minimal.  We have encountered sales comp plans that swung too far to the other extreme.  Those salary-intensive plans can create an entire set of problems themselves.  In the end, I am a proponent of a plan that blends salary with a commission.

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Inc.com has a short article reporting the survey results of HR professionals that shows a shifting trend:

In a survey of 413 HR professionals, more than half identified talent management as their top priority, and were planning to improve their rewards and benefits programs.

Most employers cited employee retention among their five toughest challenges, ahead of health-care costs, the survey found. Last year, 80 percent identified health-care costs as their biggest challenge.

I fully expect retention will move into the top spot and stay there for quite some time (i.e. years) as the Boomers retire.

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The principle of owning vs. renting is powerful especially when it comes to an employee’s job.  Ownership of a job is a fickle thing.  Yet, I have worked for managers who assigned responsibility and provided enough autonomy to allow me to excel in my role.  The younger generations seem to relish this approach even more than my Gen X group.

ManageSmarter.com offers up an article with a clear title – Padlocking the Revolving Door on Turnover.  There are 4 good points to support the article’s title, but one stands out clearly:

• Foster a sense of ownership within employees. The old encouragement to “act like you own it” is good advice. The challenge is making the adage practical. It is difficult to build a sense of ownership when the plans, activities, and details are dictated to you. Managers need to find ways to actively engage employees in contributing ideas to plans, activities and outcomes. The more employees share in the rewards of success and are supported in turning failures into learning and growth opportunities, the more they can build a sense of ownership for their projects and become fully engaged in providing successful outcomes consistently.

Don’t underestimate the importance of this approach.  Few employees, though there are some, want to work under dictatorial management.  The key point I see in this ownership approach is that it provides a path to growth for the employee.  Gen Y craves this career track as have the generations that preceded them.  The difference is that many Gen Y employees will simply leave the company to gain more skills at a different employer.

This fact leads back to the premise that people tend to remain in place when they own while they have a tendency to move around more when they rent.  Keep that in mind as you develop your team in hopes of greater retention.

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From the Herman Trend Alert (sorry, no link):

A global survey of 4,500 workers indicates that more people anticipate leaving their employers this year than last. In the 2006 BlessingWhite study, 65 percent said that they expected to “definitely” remain with their employers through the year. In the 2007 study, that number was down to 58 percent.

Also of interest, more respondents in 2007 said that there is “no way” they would stay (eight percent up from six percent—a 33 percent increase). European employers face the greatest threat: eleven percent said there is “no way” they will stay.

Moreover, employees in Europe and Asia appear less content with their current jobs than those in the United States or Canada. Only 49 percent of Europeans and 54 percent of employees in the Asia-Pacific region expect to stay with their employers, compared with 60 percent of North Americans. (We think that market volatility and the threat of recession was working here.)

“‘No way’ they would stay” is an interesting turn of phrase for a survey question.  I agree with their parenthetical comment that recession concerns are swaying North American employees.  Still, it is notable that so many people seem to have their mind set already.

I am curious to know how this data breaks out among the different ages.  My suspicion is that the Gen Y employees are far more eager to move on to the next opportunity than the older generations.  Career path is crucial to Gen Y, the majority of whom are at the beginning of their career.

If that suspicion is accurate then this graph becomes a significant concern for many companies:

We have been talking for years about employees’ lack of trust for their employers. This trust issue motivates them to feel like they must take control of their own careers. Our research indicates that workers are looking to their employers for training, education, and career pathing. This fact should concern the many organizations that eliminated their in-house training functions during the last economic slowdown and are still playing “catch up”.

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A statistic from the Career News newsletter (sorry, no link):

One in four U.S. workers is resolving to get a new job this year. The survey found that 26 percent of employed Americans said they will look for a new job in 2008.

I thought that number seemed somewhat low – I was expecting a number closer to 33%.  Retention will always be a top priority for sales managers, but it may be that the slowing economy will cause more workers to stay in their current positions this year.

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BusinessWeek.com offers up the Best Corporate Practices 2008 which is a fascinating slide show if you have time to view it.  This is from the opening of the article:

In fact, much of the gap between the best and worst management practices can be described by that word: trust. At one point as a corporate human resources leader during the dot-com boom, our company switchboard was bombarded with calls from recruiters, seeking to pull away our sharpest technical talent. Our hardworking phone operators did their best to deter search consultants looking to make contact with talent by any means possible, but it wasn’t always easy.

…

We said to our phone operators, “Let the calls through.” We said to our technical folks, “Talk to these guys. Write down everything they say. Learn as much as you can about the jobs they’re recruiting for, the projects our competitors are working on, and the salaries they’re paying. Fill out this form every time you pick a recruiter’s brain, hand us the form, and we’ll pay you $50.” Presto—some of our folks made a bunch of money in a short time, we learned boatloads about the hiring activity around town, and most important, we enrolled our employees in helping the company meet its goals.

Clever.  You know, recruiting is often a cat-and-mouse endeavor that involves multiple moves on multiple levels.  My father likes to say that some people play checkers and others play chess.  This company’s defensive approach was a smart tactic during the tech boom of the late ’90s.

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The Herman Trend Alert offers up an excellent analysis of the most pressing topic of today – retention.  I thought this statement was spot on:

The Hodes 2007 Workplace Study holds that two factors are critical to retaining valued employees. The first is choosing quality people, not settling for “warm bodies”. The second is choosing people who have long-term expectations of staying with the organization.

We encounter companies that have a hire fast, fire fast mentality.  Personally, I think this approach is high risk, low reward and we never condone this approach at Select Metrix. 

The second point is an important one also.  If you are looking at a candidate who is not currently employed, it is of utmost importance to take the extra time to make sure your position is a fit.  There are many salespeople who are in transition and are simply looking for a quick stop, money-grab position.

When employers make inferior quality hires, often they will inadvertently lose current employees who now no longer feel valued.

The study also cites what we have been saying all along—that employee turnover, regardless of industry, is expensive. Some reports even show the estimated cost of a single vacancy for some jobs has been calculated anywhere from $7000 to $12,000 per day. According to statistics from the Bureau of Labor Statistics, the estimated 2007 annual voluntary turnover rate is about 24 percent.

For more about the Hodes 2007 Workplace Study, please visit http://www.hodes.com/publications/retentionstudy.asp. (my editing)

I worked for a high-tech company in a Regional Sales Manager position.  My coworkers were better salespeople than me so I learned much and developed my skills immensely.  Then our boss hired two absolute stiffs to join our group.  They had little skill and were hired for the wrong reasons.  The morale amongst our existing team plummeted soon after as we observed their flamboyant incompetence.

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This post from the Pondemonium blog at Inc.com explains the rationale behind hiring from a corporate and employee perspective.  What is interesting is that the blogger is the decision maker who had to let people go last week.

I thought these graphs cut right to the core of employment:

I don’t know about other companies, but every time I’ve ever hired someone to work here, it was because I fully believed I’d be able to make more money with them than without them. In other words, if I pay someone $1 to do something, I expect to make $2 from their efforts or services. It’s really that simple! Unfortunately my crystal ball is sometimes blurry, the economy doesn’t always cooperate, and I’ve even been known to invest in ideas expecting future business that somehow doesn’t materialize according to my expectations.

For an employee, this same principle holds true in reverse. An employee needs to find a job that pays enough to meet basic needs and also leaves money for discretionary spending. Individuals call this “extra” money, while business owners call it “profit.” The employer and employee enter into a relationship for an identical economic need, which is to acquire “extra” money after all the basic needs have been met. No employer starts out intending to just break even, and job hunters always try to find a job that pays more than they need to survive.

What all of this means to employees and owners alike is employment should be viewed as a means to a common end. I will help you realize your dreams and goals associated with employment, such as salary, raises, job satisfaction, security, and benefits, if you will help me realize my dreams and goals, too. If I fail to do my part and am forced to let someone go, then we both lose. Likewise, we also both lose if an employee fails to do his or her part.

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Competent managers.  That’s according to a Kenexa Research Institute survey quoted in CareerJournal.com (emphasis mine).

Sixty-two percent of employees who said they have an effective manager also said they planned to stay with their job versus 17% of employees who said their manager is ineffective who plan to stay with their job, according to a survey of 10,000 U.S. workers, plus 1,000 workers each in India, China, Brazil, the U.K. and Germany.

No surprise, really.  When we first encounter a customer with a turnover problem, we start by looking at management.  Typically there is misalignment between the manager and the team or there is misalignment between the position and the current hiring process.

Either way, something is out of alignment.  When this misalignment occurs, turnover becomes the defining symptom.  Gen Y’s eagerness to grow in their roles through job change is only going to exasperate the retention problem.

The cure is strong managers aligned with a complementary sales team.  I know – no small feat.  Yet, through developing your current team and making the proper hiring adjustments, it can be done.

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I enjoy skewering the mainstream media for “talking down the economy” which is a practice they condemned back in 2000.  But all signs point to a slowdown in this red-hot economy which has led the Federal Reserve to target a soft landing.

I’m no economist, but I found this article by John Sumser quite interesting.  His take on the economy is one I have not heard (emphasis mine):

The veterans, burnt by the dot com bust and the post 911 recession will argue that business will contract and layoffs will ensue. That’s the prototypical recession profile. Everywhere you turn, this scenario is forecast or implied.

…

Or, there may be a different scenario.

The people who used loose credit to finance the expansion of their lifestyles may have been unintentional evangelists of a new form of inflation. One way of thinking about the folks who “got in trouble” is that they were wrestling with an unmeasured form of inflation. Because there was no way to engineer the raises required to keep up, the second best source of income was real estate equity. Rather than “large living over spenders”, perhaps these folks were just doing what they thought it took to stay even.

Although the press is beginning to demonize people who financed their lifestyles on second mortgages, the question is “what are they going to do without a funding mechanism?”

I think they’ll be asking for raises and when they don’t get them, they’ll be changing jobs.

Imagine this trend in conjunction with a mass departure of the Baby Boomer generation.  The implications on retention, hiring and wages would be beyond significant.

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