Discover the best pay structure for a promoted salesperson managing a new sales territory and team. Detailed explanation from an SHRM-SCP certification exam expert.
Table of Contents
Question
A salesperson takes over a new territory and will hire and manage five other sales associates and office staff. The salesperson is currently paid a straight commission but asks for a salary to match her current earnings so she can set up the office and train both the office staff and the sales force. Which is the best option to pay the salesperson?
Answer
She should be paid a salary plus a commission based on the total territory sales of those hired. The organization would be best served by paying salary plus commission. In that way they keep a valued employee happy train an up-and-coming office staff and sales force and keep a qualified successful salesperson in the field working with customers.
Explanation
The best option to pay the salesperson in this scenario is a salary plus commission structure based on the total sales of the new territory she will be managing.
There are several key reasons why a salary plus territory commission is optimal:
- The salesperson has proven herself to be successful in her current role, earning significant commissions. To incentivize her to take on the new management responsibilities, matching her current earnings with a salary provides income stability and rewards her track record.
- Setting up a new office and training staff will require significant time and effort upfront before the territory is fully productive. A salary allows her to focus on these crucial activities without concern over lost commissions.
- Basing part of her compensation on the total territory sales motivates her to hire the best people, train them well, and manage the team to maximize overall territory performance. Her commissions are thus aligned with the success of her entire team.
- The organization benefits by retaining a proven salesperson and empowering her to develop a high-performing new office and team. The salary plus territory commission structure supports this by balancing her income, incentives, and management responsibilities.
In summary, a salary plus commission tied to total territory sales is the optimal pay structure to transition this top-performing salesperson into her expanded role training and managing a new sales office and team. It aligns her compensation with the company’s goals while providing income stability as she builds out the new territory.
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