Interview: Do Sales Commissions Cause Unethical Behaviour?

Sales Commission Unethical Behaviour

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Sales Commissions & Unethical Behaviour Transcript

Ben Lai

Hi guys, it’s Ben Lai from Sales Ethos, and I’ve got with me again, Tommy Sim from Inject and Beyond HR. Welcome again Tommy!

Tommy Sim 

Thanks Ben!

Ben Lai 

Here’s a prickly one… Sales commissions – do they produce the wrong kinds of behaviors? We’ve seen the effect it’s had on the Royal Banking Commission, with the big banks and so forth. We’re not going to focus so much on that… But that’s certainly made it a hot topic. So what are your thoughts about commissions in sales teams?

Tommy Sim 

Well, so do they promote the wrong behaviors? The answer is that they can, they don’t necessarily… It really depends. So I think the first thing is to know that with commission schemes, if you do have an individual commission scheme, that is going to promote individual behaviors… Assuming, there’s enough money in there, and you’re going to have people who want to drive for that. So there is definitely potential for people to be a bit more selfish, and to have a go at the internal team if they’re  not delivering properly, that sort of thing.

Ben Lai 

Absolutely. And so the alternative to individual commissions is team commissions, which is, in my dealings with clients… I’ve seen that emerging a lot more, is that necessarily better than individual?

Tommy Sim 

No, not necessarily. So with Team commission schemes, you can have issues… It’s like when people do those university assignments, and there’s always the weak link. And people get upset about that. The same thing happens. So you’ve got people who if the amount is a large amount, people are going to get upset with their colleagues, if they’re not pulling their weight. You can have team commissions, if it’s a smaller amount, but again, people can get upset about not delivering. But you certainly don’t want to have it that, you know, you’re not paying your mortgage because I didn’t pull my weight.

Ben Lai 

Yeah, yeah.

Tommy Sim 

And also to look at what is of value to people. So people in certain roles, for them, their base salary is more important than being on commission, because they… They might… They gotta pay or apply for a mortgage, they don’t have that variable component. And maybe their role, it doesn’t actually… Their performance in the role actually doesn’t directly impact in the same way that another role would. Certain roles, where it’s very clear that my individual performance impacts that result in you can have an individual doing it. And you have other mechanisms around to do with, you know, the team aspects, hiring the right person, right? Relationship management, then yes, those can work.

Ben Lai 

Yeah, it’s interesting, though, that on a previous interview, we were talking about setting the right metrics. And I think that sometimes if you tie the commissions to the wrong things… Like if you set it only on revenue, for example, that can produce the wrong kind of results. And one thing that I’ve seen in previous roles is that… My colleagues would just discount like crazy, just to get the revenue in, but the profitability for the company was sacrificed as a result. So what are your thoughts about… What should the companys tie their commission to? What sort of behaviors or results should they be tying commissions to?

Tommy Sim 

Yeah, and it depends on the measurability and depends on the strategy and focus. So you mentioned around revenue versus profit. So if it’s just based off revenue, there’s no profit element, then people may not sell the most profitable way. They may not because some people, it might still be within them to do that. Then if you do focus it on profit, that may not necessarily get people to sell more profitably. And this is one of the issues that we see with commission schemes. It’s not necessarily the commission scheme per se, it’s how much people think the commission scheme is going to manage their sales team for them. So a commission scheme does two things. First thing is that it can drive people into a certain direction, for better or worse. The second thing is that when you do have someone who is a high performer, and they’re earning good commissions, and I like those commissions, they might think twice before leaving.

Ben Lai 

And so it kind of depends on individual expectations as well, isn’t it? So if you’re hiring someone on the basis of individual commissions, and then you suddenly say, “Oh, by the way, we’re removing that for everybody?” That’s going to have certain ramifications, isn’t it?

Tommy Sim 

Yeah, I think it’s not… There’s not kind of a one size fits all. There are people who are in sales who love commissions, there are people in sales who don’t care so much about commissions. Everyone wants to be remunerated in the right way. So you got to set up the system that works for you. I think that that’s the key thing, and not to expect the commission scheme to replace… to suddenly make people better salespeople, for instance.

Ben Lai 

Oh, right, right. So what you’re suggesting is that just because the commission scheme is really generous, some people kind of think “If I just throw enough money at it problem then the problem will go away!” But that’s not always the case, isn’t it?

Tommy Sim 

Well, it’s like… so if you were to say to me, I’m going to give you a million dollars to fly to the moon tomorrow. Well, I’d love that scheme, except I actually have a rocket ship. And I don’t know how to fly to the moon. So it’s going to be useless. So yes, you want to have a commission scheme that’s aligned. But people will still need to know how to do their jobs properly. They still need to know how to sell properly.

Ben Lai 

And so really, it comes back down to the fundamentals. Hiring the right people into the right roles. That’s where Tommy comes in. And then once they’re in those roles, putting them through the right skills and attitudes training, such as through a sales trainer like myself. And so that’s some great answers to that question, Tommy. Really appreciate you coming back and sharing your insights. If you want to connect with Tommy over LinkedIn or visit his websites we will leave the links below. But what are your thoughts about commission structures? Are they the right thing for your sales team and what has your experience been? Leave a comment below. Don’t forget to click like and subscribe. And don’t forget that integrity plus skills equals success. Thanks again for coming. Tommy.

Tommy Sim 

Thanks, Ben, pleasure!

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Banking Royal Commission: Consequences of Unethical Sales
How to Create a Sales Team without Commissions
The Dark Side of Sales Commissions

Free Download: How to motivate non-salespeople to sell

Sales Ethos helps companies increase revenue through sales training in Melbourne. We achieve results through sales coaching, customer service training, sales management training, and sales process consulting. Ben Lai is a sales trainer and business coach in Melbourne, and offers public sales training courses in Melbourne.

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