With modular housing in a downward spiral for the past 6
years, many modular home factory owners and managers have switched to a ‘commission
based” sales force. The board rooms in many factories have heard the pros and
cons of how to pay the people that actually seek new builders and consult with
the builders to close sales.
On one side you have owners, sales managers and board
members that still look at their sales people as order takers. On the other
side you have owners and sales managers that view the sales staff as the most
important link in the chain.
So why is there such a difference in thinking between the
two? Let’s take a look at the factories that look at sales people as order takers.
It was so easy to get orders before 2007 that sales people usually only had to
make phone calls or send emails to builders to get orders. Not much traveling
was required. Many sales people were asked if they wanted a salary and a small
commission or if they wanted a higher commission only system. Many of them took
the commission only route thus setting themselves up for a major problem when
housing nosedived in 2007.
And here lies the first problem. So many sales reps hold
themselves at high-esteem, but if it were up to them they would die of
starvation, for they are unable to land business for themselves now that the
low hanging fruit has disappeared.
I contacted several large factory owners and found that
when they went to commission only reps there sales actually stagnated or
dropped significantly when the recession hit. The ones that continued to
use a salary and commission either saw the same stagnation or didn’t drop
nearly so much in sales. The salary/commission reps felt that they were
appreciated by the owners for their skill set and continued to work in earnest.
A lot of the commission only reps jumped ship and went with
factories that offered salaries to reps. Today there are still factories using
the commission only system but if you look closely, they are the ones that are
hurting in both sales and production.
If you use Douglas McGregor’s (American social psychologist)
categorization, sales people fall into one of two major categories:
Type X: Sales people are inherently lazy, dishonest, dodge
responsibilities, dislike sales, thus they must be tightly controlled, coerced,
threatened and punished. Sales reps have little ambition, want unconditional
work security and prefer to be directed, for they do not like thinking for themselves.
Type Y: Sales reps inherently like challenge and
responsibility. They are innovative and proud of their accomplishments. They
can practice self-direction and self-control. The sales rep is willing to learn
new skills, are creative and capable of thinking for themselves.
What happens at many modular home factories is that the
commission only sales rep is treated like the Type X person while the salary
based is treated like the Type Y.
This is why a lot of commission only sales reps jump from
company to company trying to find the low hanging fruit again because they need
to make money to pay for things like a mortgage and car.
How does a factory increase the number of builders it needs
to stay in business if the sales staff only gets paid when they make a sale?
Business development is not even a thought to these folks but many factory
owners and managers simply don’t think that this is important.
The modular home factory that can continue to pay salary has
a distinct advantage over the commission only sales factory as it has given the
sales rep an incentive to go after new builders while still rewarding then for
bringing in sales.
If you’re factory is commission only, you will always be
looking for new sales people, usually from a pool of inexperienced people. You
will pay them a training salary for up to 6 months before cutting the cord but
it won’t be long before these reps start looking for a better opportunity.
