Teach your Salespeople to Swim, not Surf
Teach your Salespeople to Swim, not Surf
The big difference between compensation and production - and why it matters to your talent attraction and retention strategy
Sometimes it only takes a small shift in perspective to make a big impact on people’s lives and careers. That’s why leaders emphasize the difference between production and compensation when it comes to attracting, growing and keeping their best talent.
Here’s how it works.
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Most Salespeople Do Not Have a Compensation Problem
Most salespeople do not have a commission problem.
They have a production problem.
My mentor taught me this simple mindset shift decades ago, and it has never failed to be true. Whether the market is white-hot, or we were in the middle of the biggest financial crisis in a century, or even a pandemic, income has never been about the “formula” by which a salesperson was paid:
It’s always been about the amount of production a salesperson has made.
I coach salespeople on 50/50 commission splits who out-earn salespeople on 100% plans. I have salespeople on salaries who under-perform agents with profit-sharing plans. I know salespeople with a dozen people in their “downstream revenue” plan who are broke; and individual agents who earn nicely on a traditional 70/30 split. I’ve worked with companies who dangle sign-on bonuses to agents who quickly spend it all, then flunk the business a couple of years later. And I’ve watched new agents on referral-split programs bring home more profit than veterans on “capped” plans.
How can all of this be true?
Because 100% of nothing produced is nothing earned.
You Can Only Earn What You Produce
It’s an iron law of economics - and therefore, sales - that you can only earn what you produce. Your business plan, on paper, won’t pay for one pencil (let alone your mortgage or kid’s tuition). Not until you actually make a sale - and then more sales.
Yet we work in an industry that’s obsessed with competing business plans. The noise ramps up towards the end of the year, too, as people try to “tempt” talent to join their firm by flooding the airwaves and inboxes with their secret-commission formulas.
As if someone will someday invent the best-of-all-plans and drop the mic….
(On their foot, most likely.)
I’m not jaded about compensation, either. It’s simply that after 33 years of business, I cannot believe there’s some hidden formula that hasn’t been found already. For the managers I coach, it’s why I don’t let them talk about their compensation plan until after someone has agreed to join their firm.
We don’t start with the belief that our comp-plan is important.
We start with the knowledge that what matters is how many deals - and how well done - our model will help people perform each year.
Why Your Production Plan is the Only Value
Smart leaders focus on their production plan.
Whether they’re talking to commission-only salespeople, or salaried and bonused employees, the only way to earn a living is to produce the right amount of results. It’s the only way to get a raise for employees, too. You have to contribute more - to the consumer, the operation, the market - in order to generate the revenue from which you’ll keep more.
To paraphrase Humpty Dumpty,
All the king’s spreadsheets,
and all the king’s leads,
didn’t help an unproductive salesperson
make enough for a trip to the beach.
More, and better, actually.
For most people, more income means increasing production: The average real estate professional last year earned under $55,000 and sold somewhere in the range of 5-6 transactions. In a marketplace of $70 Billion of commissions annually, there’s leaves plenty of room for individual growth, especially since housing is not a zero-sum game:
Producing more sales per person doesn’t mean taking any from competitors.
In fact, during the most productive year in the industry (6 million sales in 2021) the number one complaint was a “lack of inventory” — a hilarious irony, when you think of it! How could we sell more than ever, if we also hadn’t found a way to bring more inventory than ever into the market?
A salesperson’s amount of productivity growth is truly unlimited.
Lifelong Better Earnings
At the same time, salespeople’s revenue or an employee’s raise can come from doing better quality production.