3 Possible Risks in Hiring Commission-Only Salespeople
Some companies that wish to keep their momentum going tend to hire commission-only salespeople on the promise of a flexible setup.
Arrangements with commission-only sales roles offer a win-win solution: There are no long-term commitments for the company, and the salesperson will be motivated to work independently.
If agents deliver results, they get paid. If not, the company can easily move on to a potentially better sales representative.
While this promise of flexibility sounds appealing, it comes with some risks that, if not studied carefully, can make more problems than solutions.
1. Independence that leads to detachment
In a commission-only arrangement, sales representatives tend to work mostly for the commissions, and less for the company’s goals.
Most salespeople take commission roles for flexibility, but in the long term, running after commissions could shape a mindset that takes away care for the product and the organisation.
Imagine your agents going to work one day motivated to bring enough sales for the commission, and turn up on another day, too relaxed because he’s got enough savings of his own.
True: a motivated salesperson would work independently to meet his quota, but he could also be detached, selling your product without necessarily caring or believing in it. This could, in some cases, damage your brand reputation.
With agents not aligned with the company’s values, vision, brand, and identity, the arrangement could be a disaster waiting to happen.
2. Unpredictability and bad reputation
Without a strategic and measurable attack on sales, agents are doomed to produce extreme results on both ends – overperforming one day, underperforming the next.
With commissions as the biggest motivation and without an attachment to the brand and the values it stands for, a salesperson could go to the extremes and build a negative recall of your brand.
Some prospects may look at your organisation as unstable because of the extreme swings in terms of sales, and this could be highly damaging and difficult to fix in the long run.
A good reputation is one of the most important assets of any organisation and having a bad one can have costly repercussions in the long run.
According to Brightlocal, prospects would typically read around 10 reviews before declining on a purchase.
3. Short-term success that overlooks long-term growth
To keep agents motivated, companies with commission-only agents are under constant pressure to provide incentives.
Incentives would certainly motivate agents to spend more time on new sales opportunities and convert leads constantly, but without a sound strategy, it can hurt the profit in the long term.
Commission-only agents will certainly produce short-term success, but without a proper strategy, organisations may overlook its long-term growth.
Many studies show that some companies that spend more time focusing on quarterly earnings usually result in poorer long-term growth rates.
A McKinsey study, for example, revealed that businesses that focused on long-term growth from 2001 to 2014 outperformed companies that focused on short-term success by a whopping 36 percent.
The research, however, does not mean that short-term wins do not mean anything at all. Short-term solutions do assist immediate growth requirements but thinking long-term is more sustainable.
Outsourcing sales as a flexible, cost-efficient alternative for commission-based sales
Commission-based sales are effective for short-term needs, but it still needs a long-term strategic solution, which can be found in offshore outsourcing.
Outsourcing partners can give companies access to certified and trained salespeople who would get the job done the way your company wants it to – with measurable results.
And because outsourcing firms source talent in regions with a lower cost of living, organisations are bound to hire quality agents with low labour costs that leads to around 72% in cost savings.
In the Philippines, one of the top outsourcing destinations, agents are known for their excellence in communication, passion for customer service, cultural adaptability, and problem-solving skills.
Filipino sales agents can work with a wide variety of industries such as telecommunications, real estate, insurance, market research, financial services, retail, consumer goods, utilities, and more.
High-calibre agents, reduced costs, brand integration, and flexible arrangements are all benchmarks of long-term success.
Outsourcing has been a go-to solution for many organisations around the globe and building an offshore sales team would be can be a good strategy than going with commission-based arrangements.