Salary has always been the driving force behind many employment decisions being made on both sides of the employer-employee equation. And for sales and recruiting roles, roles largely compensated based on a combination of salary and commission, there is a great deal of variability in earnings potential from company to company - even if they’re in the same market!
In short, it all comes down to the compensation plan. Depending on a number of factors (most of which are outside of the individual being recruited), there are countless formulations of compensation structures.
However, there are signs and signals of a good compensation plan. When an individual is going through the hiring process and trying to understand the nuances of an offer’s comp plan, it’s important to understand which questions you can ask to get at the big question: is this compensation plan enabling or prohibiting people from earning what they deserve?
The general characteristics of a good compensation package include:
- Unlimited commissions
- The number or percentage of people that are attaining 100K, 200K, and 300K in the organization
- For contract/residual employees, a decent base and low commission percentages
- For permanent employees, a low base and high commission percentages
3 Questions to Ask When Trying to Understand Your Compensation Plan
Question #1 - How often has the compensation plan changed in the past year?
Why it’s important to know: Compensation plans are likely to change at some point. That’s not necessarily a red flag on its face. However, a constantly changing framework, no matter the commission structure, becomes a relentlessly moving target that cannot possibly be good for the employees.
Different commission structures incentivize different behaviors. And when a leader shifts the target of a commission structure more than once a year, it can greatly impact that employee who is working hard to increase his/her earnings by meeting a specific metric targeted in the existing commission structure. It’s hard to have control over your earnings when the determinants of your success/failure can change at any time.
Question #2 - What percentage of sales reps or recruiters are reaching the high end of their on-target-earnings (OTE)? How long, on average have these sales reps worked here?
Why it’s important to know: Understanding what percentage of employees are meeting their targets will help you determine the achievability of these goals. Moreover, understanding the average tenure of the employees reaching their targets will shed light on how quickly you should expect to meet yours. If only 50% of employees reach their OTE potential in the first year and there is 50% turnover on average in the first year, that’s a 1 in 4 chance of you meeting those projections in year one. That’s a red flag.
Question #3 - What is the average tenure of your top performers?
Why it’s important to know: Not only does the answer to this question lend insight into how long it takes for someone to be successful within the organization, it can also help you understand how much the company prioritizes employee retention. Generally, you would want to hear that a decent percentage of the top performers have worked at the organization between two and five years. Having a good balance of the tenure of top performers (i.e. decent percentage with 2-5 years’ experience and decent percentage of 5+ years) indicates that it’s possible to achieve quickly and that the organization knows how to keep its employees happy long-term.
Bonus question: Do you have any sales leaders that have been in the role for more than two years?
While this question doesn’t directly tie to compensation, if the answer is no, that could be a signal that the company lacks stability in leadership (which often trickles down through the rankings).
When considering an offer for a sales or recruiting role, a low base shouldn’t automatically discount a given opportunity. It depends on how much the overall comp. plan enables workers to reach their full earning potential. These questions can help you sort the good offers from the great ones!