Which comp plan is better: Commission or Salary & Bonus?

Which Comp Plan Is Better: 100% Commission or Salary Plus Bonus?

One of the biggest debates in the trades is how salespeople should get paid.

Should they eat what they kill? Or should there be more stability?

In today’s Question of the Day, I break down one of the most emotionally charged topics in sales leadership and explain why there’s no such thing as a perfect compensation plan.

Because every comp plan creates behavior.

And the real question is:
 “What behaviors are you trying to create?”

In this episode, we cover:

100% Commission

•  Why it creates urgency, hunger, and accountability 
•  The types of personalities it tends to attract 
•  The upside of performance-driven cultures 
•  The risks of pressure selling, short-term thinking, and emotional swings 

Salary + Bonus

•  Why it often creates more stability and collaboration 
•  How it can improve consistency, retention, and customer experience 
•  The danger of comfort, complacency, and reduced urgency if incentives are weak 

This episode isn’t about declaring one system “right” and the other “wrong.” It’s about understanding how compensation shapes culture, performance, and behavior—and making intentional decisions based on the kind of team you want to build.

Have a Question? - Submit your questions to chrish@nexstarnetwork.com

Transcript

SPEAKER_00 0:09

Welcome to the question of the day. Today's question is which sales pay plan is better? A hundred percent commission or salary plus bonus? That's a great question. This is one of the biggest debates in not just the trades, but sales in general is how should salespeople get paid? Should salespeople eat what they kill or should there be some more stability? The conversation either way gets pretty emotional pretty fast because anytime you're talking about anybody's compensation, this is a very touchy topic. Even if even if you're looking to make a pay plan change that pays them more and for the better, any change is viewed with a lot of scrutiny because this is this is tying to livelihood. This is tying to family and what motivates a person to do what they do. And so anytime we start talking about pay, the very first thing I say is if we're gonna touch pay, you better have a really good reason to touch pay. I wouldn't touch pay just for the sake of touching pay. I also want to set the tone early on. There is no there's no perfect pay plan, doesn't exist. I was on a pay plan committee uh for a company that had 28 locations, and we were trying to figure out the perfect pay plan, and we brought in all these high-performing salespeople and and we sat them through different models of a pay plan that we were considering and different incentives. And I remember one of the salespeople stood up and said, Look, there's no perfect pay plan. We're gonna figure out how to game whatever pay plan you put in front of us. And that was the truth. That was a big aha moment for me that that there is no perfect pay plan. You wanna do your due diligence, you want to model this out, you want to model for every scenario the best case scenario, the worst case scenario. You want to put math and actual numbers to it, but but there is no perfect pay plan. I do think, however, pay plans should be very simple. Anytime I've seen complicated pay plans is followed by frustration. They should also be very transparent of what behaviors do they drive. Anytime they've been complicated or not clear on what the behaviors are, it it creates a lot of frustration. And frustrated salespeople tend to leave, even your good ones. Good salespeople, you shouldn't be letting good salespeople leave. And so the real question becomes not which pay plan should you do, but which behaviors are you trying to create? So let's let's go through both. Let's weigh out the pros and cons of each, because there is no perfect pay plan. And then you can decide, I guess, what pay plan works best for you. So let's let's dig into the 100% commission pay plan, right? This is the classic sales pay plan of you eat what you kill. So it has strong upside potential. It creates urgency, it creates hunger. There's always that reason for a salesperson to go out and keep chasing, keep chasing. So there's a lot of upside to this. There's a lot of potential to this. This often attracts highly competitive people, people with a lot of drive, what we would call closers, right? Self-motivated personalities. So somebody that's not going to need somebody pushing them from behind, but they're they're motivated and a self-starter. This is easy and attractive from an ownership point of view because you can tie payroll directly to performance. So if they don't perform, they don't get paid and it doesn't, it doesn't matter. That's why you see, like in the automotive industry, like the classic 100% commission uh salesperson, like they don't care how many salespeople they have, they'll have a lot of salespeople out there because if they don't sell cars, they don't get paid, right? It's tied right into that performance. They know a lot of them aren't gonna be sticking around. It's only gonna keep, you're only gonna keep the the highly competitive ones, the ones that are closing a lot of leads. So, so some pros to this plan is they're hot, there's high accountability. They don't sell, they don't get paid, they're not gonna last very long. It's a performance-driven culture, so they're really driven to perform. And it really pushes that closing, that average sale. It pushes that follow-up, closing the leads that you have in front of you, or driving new leads, driving your own leads. And it's got a low overhead for the company. Now, the downside to a hundred percent commission pay plan would be it can create pressure selling. It can be very salesy, very high pressure, which customers might not like. It creates very short-term thinking. We're focused in the today and what can I sell today and this month, and we're not often thinking about next month and next quarter and next year and the long-term vision of the company. So it creates short-term thinking. It also creates high turnover. So those auto dealers I was talking about, they don't care how many salespeople they bring in. That's a lot of onboarding that they're doing, that's a lot of um recruiting, a lot of hiring, a lot of HR work that goes into these salespeople coming on. So high turnover. So some of the salespeople, they may be chasing commissions over customer experience, so they don't care so much about what the customer thinks. I know of a car dealership that I didn't personally work with them, but I had trained somebody that came from them, and they said the first thing they were told when they started at that other car dealership was they will either leave with a car or they will leave angry at you. That's because they were they were focused on the sale, they weren't focused on the customer experience, right? Um, this may also create avoiding teamwork. If I'm paid 100% of commission, why should I come in for sales meetings? Why should I come in for team trainings? Why should I come in for anything additional? I'm just gonna sit at home until I got a lead. And so it avoids uh teamwork. And you get very protective of your leads, of your accounts, lots of internal fighting over that was my leader or not. So it can it can create an emotional roller coaster just because of that fighting, but also because it's feast and famine. If you're not a seasoned salesperson that knows your seasons and and you plan ahead for that, you're gonna be a hero one month, you're gonna be a baller, you're gonna have tons of money, and then you're gonna be on food stamps the next month. And panic sets in. Now, a bad habit that I see with the 100% commission pay plan is we believe that we can manage through pay, that we can just leave them on an island. Well, if they don't sell, they're not getting paid. So I don't need to manage them, I don't need to do anything with them. So we don't do ride-alongs, we don't do trainings, we don't do one-on-ones or debriefs or win the day, or we don't have any kind of goals. Like we don't care. And that usually leads to a poor culture and that short-term thinking that I was talking about. So that's the bad habit I see with 100% commission pay plans. We think we don't have to manage anybody. So let's flip. Let's flip to the other side here. So some kind of salary or hourly plus a bonus structure. So this generally leads to more stability, less fear-based decision making. It often creates a calmer environment. It's it's more of a team mentality and longer-term thinking. We can strategize. So some pros, some pros of the salary pay plan. It can improve consistency so you don't get those ups and downs as much. So more consistency, more retention, so you don't have as much turnover. You have you have a team that that sticks around, more collaboration, more willing to share. So when you're having a sales meeting or a training and you're asking what's working out there, they may be more willing to share. Because in the commission pay plan, if I'm doing really well, I'm in competition with everybody. Why would I share what's working? I don't want to. But in this pay plan, I may be more team-oriented and I may be willing to share what's what's working for the betterment of everybody. I may be more focused on the customer experience because I'm not solely paid on whether they buy or not. I would also add it, it creates an attractiveness to the role where people outside the industry or people outside sales may be attracted to the role. And I can speak to this from my own experience. I'm not saying I was the best salesperson, but I think I was a pretty darn good salesperson. I consistently ranked in the top 10% out of 180 salespeople. Um, I was consistently number one, number two at my location. So I was a pretty good salesperson, but before I started in sales, I was actually a second grade teacher. I taught grade school. I mean, I didn't go to school to be in sales. I never dreamt that I would be in sales. The only reason I got into sales was because my wife was also a teacher, and our two little teacher paychecks didn't buy a house, didn't start a family. And so one of us, me, had to go out and and start doing something else. And so I got a job in sales. Never thought I'd get into sales, but but one of the things that made me take that leap was that my first sales job, it was a a salary plus a bonus. So, like at the end of the day, if I didn't sell anything, I still had like a a livable wage. I mean, it was gonna be like bologna sandwiches and ramen noodles, but but I at least wasn't gonna starve to death. But it was also made very clear to me, like if you don't sell, like if you're performing at that level, you just won't be here very long either. And I thought, well, I could at least do better than that. But it it got me to take that step anyways, and it ended up being a very good step for me because I I love sales. At that time, I thought, man, I'm becoming a salesperson. What am I doing here? Right? Like, this is what a guy does. But now looking back, I'm so thankful. So so thankful I took that step. But I probably wouldn't have if I wouldn't have had that safety net, that cushion. And so there may be other people that that have the skills that we desire that aren't in sales roles right now or aren't in the trades right now that we want to bring over. And and without it, it it may not lend itself to that transition. So it may make it more attractive to people outside of that role. It also allows you, another pro is it allows you time to develop. So you don't have to worry, I gotta get out there and sell right away. You have this cushion of I can learn the process, I can practice the pro, I can get good at the process, and I'm not gonna starve to death in those three months as I'm ramping up to taking sales calls. So, and it reduces that desperation of I gotta sell right now. So equaling a better customer experience. Now, some cons, some cons to the salary plus bonus. It can reduce urgency. I'm getting paid either way, I'm getting paid something either way. That bonus isn't very much, and so I don't really push that hard. I don't create that urgency. I don't paint the picture that today is the best time to buy because tomorrow could be a good day, too. Or maybe next week or next month or you know, someday. I don't do follow-up because yeah, I don't have that urgent. I get another fresh customer I can work with. I don't need to close that one. I don't want to be seen as salesy, right? I don't, I don't want to have an uncomfortable conversation, so it reduces that urgency. There's a risk of getting too comfortable. I don't push to get any better in sales because I'm comfortable how I am right now, and it creates complacency. I worked with a team a while ago, and they had a low-performing salesperson on their team, but they paid a high percent commission on top of a salary, and it was not tied to profitability of the job either. So this person could sell a job, and even if they screwed it up, even if they misquoted it, even if they had to discount a bunch, even if it wasn't a profitable job, they still made their salary each month, plus they got a pretty high commission on top of it. Enough that it was this is how it shook out. The guy was running about one call per day, and he was on pace to make $300,000 that year. So think about that. You're working like two, maybe three hours a day, and you're on pace to make $300,000. The comment I made on that coaching call was, are you hiring? Because I would easily, I would gladly take that job. I would move to that location if I could work two to three hours a day and be on pace to make $300,000. And it's because they were very complacent, they were making a ton of money and not doing a whole lot of work. And so it created some low accountability for that person as well. And and that's another con of the salary pay plan. There's there's low accountability to sales, so it's harder to create elite performers if that incentive is weak. So pros and cons to both. Both work. I've seen both work. If you set them up, both can pay the same if they're set up apples to apples. You can make it so that X sales equals X pay. Just different in how you do it. If you're doing 100% commission or if you're doing the salary plus plus bonuses, both can be set up equally. I think a lot of it comes down to it depends on the people involved and what motivates them. It depends on the culture of your location. The big aha that I would emphasize is you still have to manage both. Both of them still need a leader that gets involved and rides along and provides training and one-on-one and debriefs and sets a win the day and has goals. Like we still have to manage both ways, and we have to set expectations around what the role is. What I see a lot of companies do is they do a hybrid between the two. Hybrid meaning when someone comes on, they start them on a salary plus a smaller commission. Because what that does is it allows them the breathing room to train, that they can come in, they can learn about the company, learn about the customers, learn what the process is, go to that training, implement that training, make some mistakes along the way starting out, but but have a strong foundation so that then as they enter into full-time sales, they can do really well. And that's when they transition into a commission-based pay plan. And so I see a lot of companies do that. I one company that does that, I I asked him, I said, what if you had a salesperson that didn't want to transition after that? What if they wanted to stay on the salary? And he said, Well, I don't care, they can stay on the salary, then it pays the same either way, because he had both plans set up the same way. And honestly, you have to perform either way. Because even if you get complacent, if we're managing and we set expectations, I still have to hit sales goals. Because go back to my example. I came into a sales environment where I had a salary, but if I want to sold anything, they wouldn't have kept me around just to pay me a salary. They wouldn't have kept me around to be nice. Even in this role, here I don't make commission. But if I'm not a very good coach, if nobody wants to talk to me, I'm not going to be kept. I'm gonna be unleashed on the competition here. And so you have to manage both pay plans. So my final thought though about comp, just generally, comp has to be simple. Keep it simple. Do not make it complicated. Complicated equals frustration. It has to be transparent and be very clear about the behaviors you're driving. When it is simple, when it is transparent, and it meets the needs of the salesperson, we can set it and forget it. My goal for compensation is honestly we're not thinking about it. We set the comp and then we don't think about it again. It's simple, it's transparent, set it, forget it. Because then it allows us to focus on success. It allows us to focus on the things that matter, which is executing that process. That's today's question of the day. If you're enjoying question today, follow, share, give a reading question days on major streaming platforms. If you have a question, reach out to me via email. It will be listed below in the show description. Let's get your question answered. And if you're an XR member, schedule a call. Schedule, schedule a call with me, and we can address this one on one and get very specific to your situation. I'm Coach Chris. We'll see you tomorrow.