Commission Only guarantees FAILURE
There is (and always has been) a disturbing trend in hiring salespeople as commission-only, independent contractors in today's business environment. Having been a sales guy for over 30 years, I have seen and taken almost every compensation package offering available, including huge commissions based on performance. Hiring salespeople as commission-only contractors is detrimental to a company and could cripple sales simply because of hiring and compensation policies. One of the most important groups in your company is isolated, set apart, and not valued enough to be an employee. It is still the ONLY group within a company that is valued and treated this way.
I am not conveying that performance is not required or expected by salespeople. On the contrary, I am a huge advocate of accountability and holding employees' feet to the preverbal fire. I feel that EVERY employee should be held to the same accountability standards, not just the sales department. As a business owner, would you ever consider a commission-only compensation package for your accounting or IT department, or perhaps your HR or warehouse personnel? Of course not. These departments are of critical importance to the company. Is your sales department of any less critical importance to the success of your company? Should this department be the only group that is not worthy of being paid a salary or valued for their experience? The mindset of "they do not cost me unless they sell" is hiring for expected failure rather than hiring for excellence.
Hiring commission-only salespeople because they do not cost the company unless they sell is a flawed logic. Valuable salespeople will not accept commission-only because they know they bring value to the company and that that value is worth being paid for. You as the company spend the time to post a job, interview people, hire them, and train them on your product or service. You spend a great deal of time, effort, and money to hire salespeople that you do not expect to work out. You then place these people in a position to be the face of your company. They are your "first impression" of your potential customers. Have you ever considered the number of potential customers you lose because of a commission-only salesperson who is not capable or who is ineffective at their job? Depending on your business, commission-only salespeople can cost you everything and force you to close your doors. I will leave the discussion about unrealized revenue from lost sales due to poor hiring practices for another blog.
Something else to consider is that by law, there are specific rules on hiring commission-only employees as W-2 or 1099 contractors and what a company is allowed to and not allowed to require. As a W-2 sales employee (unless you are 100% outside sales), the company is required to meet minimum wage expectations therefore throwing a kink into commission-only from the start. If the “employee” is truly commission-only, the company must engage them as an independent contractor, and they are responsible for ensuring that person is properly classified. The Internal Revenue Service (IRS), Department of Labor (DOL), and individual states each have different factors that determine whether a worker can be classified as an employee or an independent contractor.
The basic facts (restrictions) on hiring commission-only people look like this: The contractor decides how they do their job, not the company. For many people, this involves operating out of a home office but could also mean being a digital nomad and working remotely across countries and continents. According to the IRS, you cannot even provide them with office equipment or desk space, or they are classified as employees. As an independent contractor, you have the right to market your services to other businesses. You can also work with multiple clients at once. As an independent, you are free to work whenever you like, unless specified in your contract. Many people ask, “Can you tell an independent contractor when to work?” The answer is no. An IC has the right to engage subcontractors or partner with other ICs to complete projects or specific tasks. You can’t force the IC you hired to be the one completing the work.
This is the nature of the beast of an independent contractor or commission-only contractor. Put yourself in the contractors’ shoes and try to understand that they will work for as many companies as they can to see what products or services will make them the most money. You will never get their full attention or effort because they are looking for whoever will pay them the most and the fastest. I have had personal experience working with a company that only hired commission-only salespeople. They could not even have weekly scheduled meetings to review sales pipelines and potential. How were they ever going to forecast anything, much less know if their sales objectives were going to be met? You can’t even require KPIs to be followed.
In my humble opinion, if you want sales, then you hire professional salespeople and you pay them like any other employee. Ask yourself the following questions when you decide to hire a new salesperson.
Is a salesperson less of an employee than an accountant or someone in HR or IT?
Do you know the questions to ask to find a salesperson during an interview?
Are sales important to the success of your company?
How much revenue are you losing by hiring the wrong people?
Does hiring unqualified salespeople affect your company's reputation?
How does a commission-only salesperson, without any financial commitment by the company, have the company's best interest in mind?
To conclude, I have stated several reasons and given examples of why hiring salespeople as commission-only contractors is driving a company to failure. As easy as it sounds to just let anyone sell your product or service because they do not cost you, why would you ever leave something so critical to your future in the hands of people you don't trust enough to hire? Hire salespeople like you would like any other employee and interview them properly. Do your job and hire great employees regardless of their position. Value your salespeople for their experience and capability, and they will become the cornerstone of success for your company.
