Today’s guest blogger is Geoff Crews with Forsythes Recruitment in Newcastle, New South Wales, Australia. Forsythes Recruitment specializes in engineering and technical recruitment; corporate recruitment, including executive, sales, HR, and finance; office support recruitment including admin, accounts, and clerical; trade and industrial recruitment; and organizational consulting including psychometric assessment, outplacement, and OD. Geoff serves on the NPAworldwide Board of Directors.
An article in the Harvard Business Review entitled Why Incentive Plans Cannot Work goes into some depth about rewards and the human psyche. It was published in the September-October issue of 1993.
Nearly 25 years later, many of those years I’ve spent recruiting sales people, and I wonder if we, as agencies and employers, are yet convinced that commission delivers the best outcome for clients.
It’s not a one-size-fits-all scenario.
Selling your house for $5000 more to a prospective buyer is worth around $200 to your real estate agent. Who might then split that with the licensee. Is it the commission or the character of the agent that drives him/her to push the buyer that bit further?
Commissions for car salesmen are more complex. Other factors come into play including the number and age of cars in stock, the manager or dealer’s projections and even the time of year.
Research tells us that the more complex the commission, the less effective it is in driving sales success. My experience recruiting sales people across industries supports this research. Many candidates I have interviewed, when asked how their incentives are calculated, tell me they are unsure. Any wonder they are sitting in front of me considering alternative employment.
For most recruitment consultants, remuneration is base salary plus commission on placements. Rod Hore (www.hhmc.com.au) in his 19 March 2014 article would suggest this is an outdated remuneration structure for large parts of our industry. “Commissions were initially brought in for people who achieved sales, and sales to me is about winning new clients, not necessarily about doing the job of recruitment,” he said.
I agree with Rod. And it would seem there is a wave of recruitment firms redefining their remuneration, fee structures and service offerings to deliver and reward not just a single placement but a breadth of outcomes considered strategically more valuable – market research, candidate attraction, long game pipeline creation, talent engagement, consulting. Such firms think and behave like marketing companies (see www.gregsavage.com.au 5 May 2015).
Global software firm ThoughtWorks removed commissions for its salespeople and says it has worked wonders for the company. ThoughtWorks believed salespeople were spending too much time on “non-productive, administrative efforts,” and that the right salespeople weren’t being assigned to clients. “Not having a commission structure ensures every salesperson can concentrate on chasing the deals and coming up with constructive solutions for clients.”
Profit-sharing schemes are becoming popular in boutique recruitment firms like mine.
A group profit share fuels internal cooperation and delivers genuine group strength to clients. NPAworldwide works on this principle – a global cooperative of boutique agencies working together for the benefit of clients and sharing in the success.
Profit share creates more rounded consultants as it necessitates a commercial understanding that goes beyond the revenue line of a P&L. And profit share means success is shared amongst the team. Which, provided you have the right team, is way more fun.
Maybe I’m crazy. But in a world of disruption I wonder if we as an industry really believe that traditional commission will be the structure upon which our piece of the ‘talent acquisition’ pie will grow over the next decade.