We get a lot of questions about whether sales compensation is sagging in light of the economy. The simple answer is no, sales compensation is not dropping…for the reliable performers.
The detail behind the answer involves looking at supply and demand. The model of supply and demand is the backbone of price determination in a free market. Demand refers to the amount of product or service that is desired from buyers. Supply represents the amount of products or services provided. The ensuing philosophy dictates that price is a reflection of supply and demand. With high unemployment creating a large amount of candidates and low supply of jobs, it would make sense to believe that the price (salary) would be reduced as well.
In the world of retail the example might look like this. Your favorite band is having a special concert. Because there is a surplus of concerts, the supply and demand market has determined the acceptable ticket price among buyers is forty dollars. So you plan on paying forty dollars.
In the job market overall, the same theory looks like this. With employers hurting financially and receiving hundreds of applicants for a single open position, hiring managers can offer lower salaries for available jobs. You believe you can offer a lower salary too. It’s a buyer’s market for talent, right? Let’s take a closer look.
You go to buy a forty-dollar ticket to the concert and you can’t find one. While forty is the standard price for most shows, this is an exclusive performance with limited seats, so these tickets are one hundred fifty dollars. With only a limited supply available, and demand high, the longer you wait for tickets the more expensive they will get, if you can get one at all. Demand has increased for the tickets and so has the price. Your choice is to pay less for a lesser show, or pay more and invest in the top performance you desire.
Hiring the best sales talent is like buying a ticket for the concert. Overall, there are plenty of salespeople to employ, just like there are many concert tickets available to purchase. However, you don’t want “any ticket” or “any salesperson,” you want the special one, the best.
Twenty percent of all salespeople make eighty percent of all sales. Want cheap? Bargain hunt low performers, and get yourself a down-market deal. Want gold? Dig for the top twenty percent and pay what it takes.
Don’t be fooled by the economy. The market may be dropping, but the desire to hire talented sales performers is increasing. Demand is high and supply is low. If you think you can offer a drop in salary, be prepared for a drop in sales.
He co-authored Sales Recruiting 2.0, How to Find Top Performing Sales People, Fast and provides regular insights on sales team management and hiring on the Peak Sales Recruiting Blog.
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