More and more field service firms are doing it. In order to encourage their techs to be proactive salespeople, many firms are offering some form of a direct incentive system, either based on a percentage of the actual sale that results from their efforts or a fixed amount (e.g. $50) for every lead that ends in a sale.
This sort of compensation is popular for many reasons. It’s relatively easy to implement. Increased profits from the sales generated cover the costs. The program rewards effort, so it provides reinforcement of the techs’ behavior.
Although these benefits may seem to tip the balance in favor of a commission program for your service business, there are many factors that suggest that this approach may not be for you. Here are six drawbacks to consider before implementing a commission-based pay program:
Problem: Difficult to Explain
How would you feel if your auto mechanic were being paid a commission on all parts and services sold? Would it cause you to think twice about acting on any recommendations? Would you be inclined to seek a second opinion? If this makes you feel a little uncomfortable, then imagine how your customers will feel if your technicians are similarly compensated. How will you explain it to them if they ask?
Problem: Encourages the Wrong Behavior
If you are asking your technicians to make recommendations only when they feel that the customer would benefit in some way, then the focus of their recommendations are on adding value rather than on adding sales. However, this message may be lost when technicians are directly compensated for the sales revenue generated. They may lose sight of acting in the best interest of the customer and feel encouraged to make recommendations for the purpose of earning the commission.
Problem: Difficult to Manage
Although these types of programs are relatively easy to implement, they can be difficult to manage well for several reasons. Sometimes disputes may arise over what qualifies for compensation. Other times company leaders may lose sight of managing the system, so things fall through the cracks.
How would you feel if your auto mechanic were being paid a commission on all parts and services sold?
Often it is because management is reluctant to pay compensation for work that they feel the organization would have received anyway. A poorly managed program can become the focus of complaints rather than the positive reinforcement that it is intended to be.
Problem: Perceived as Unfair
If technicians are directly compensated for revenues generated, there is a real possibility that some techs will benefit disproportionately. Not all technicians have the same opportunity for generating new business. This may cause frustration and resentment in the team.
Problem: Degrades Perceived Value of Service
I have spoken to many technicians who resent direct compensation programs on principle. They take great pride in their work and feel that incentive payments for work that they regard as part of the job somehow degrades the value of the work that they do naturally. These technicians will often refuse to participate in such a program and look down on those who do.
Problem: Money Isn’t Always the Top Motivator
A key reason why many firms adopt direct compensation programs is the belief that they will encourage repeat behavior. Although they may achieve this in some cases, they cannot replace management’s role in encouraging and supporting the adoption of new skills and behavior. Management’s efforts in teaching, coaching, practicing and reinforcing these skills will have a significantly bigger impact on skills adoption than any compensation plan ever will.
If you are considering a compensation program for your technicians, be aware that your actions may have unintended consequences. If your goal is to fully and enthusiastically engaging your technicians in business development activities, you should implement a plan that encourages the right behavior, is perceived as fair, and is easy to explain to your customers.
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