For years, I have strongly believed in paying commissions. Up until the pandemic significantly increased the pace of change relating to the relationship of employer and employee, like many small business owners, I was willing to tackle the various issues regarding compensating a sales employee on a commission basis. However, in today’s world, it is necessary to reconsider many business decisions made in previous years. This article attempts to recognize the pros and cons of managing a commissioned sales floor. 

Many articulate individuals answered my online post placed on Shoe Dogs United (a Facebook group focused on the shoe industry which has over 5,000 members) in March, where I sought out reasons why some store owners have opted for a non-commission environment. 

Amber Mullins, owner of Ms. Bossy Boots, Crystal Lake, Illinois, offered her opinion that commissioned pay systems “create petty squabbling over specific sales as well as disagreements over who does what in the store.”  Mullins also summarized her view with these words, “The benefits of NOT paying commissions supersedes any pros of attracting & retaining employees.”

Adam Farber, owner of Mark Adrian Shoes, Gloucester, Massachusetts, expressed his main reasons for never paying on commission: “It conflicts with maintaining the type of culture I want for my store. I want to create a more relaxed, lower-pressure environment for my customers. I also want my staff to work as a team. If someone is not clicking with a customer, another salesperson should get involved and possibly take over with the customer. As an owner-operated single store, I am almost always on the floor with my staff, so I know they are working hard. While I don’t pay commission, I do pay a higher wage and spiffs on additional pairs sold beyond the first and on clearance shoes.”

LaRonda Denkler, former co-owner of Vince Canning Shoes and Tooties Shoes, Delray Beach, Florida, says “We found commissions did not work with our highly seasonal business. Employees would feast in the winter but experience famine in the summer. We did pay bonuses on selling multiple pairs or hash shoes.“

Carla Irvin, owner of Plum Bottom, Harrisburg, Pennsylvania, stated, “We moved away from commissions because of the competition it engendered, as well as the reluctance of staff to pitch in with daily tasks. We do, however, pay a monthly bonus based on team sales goals”. 

Eric Michelson, President, Michelson’s Shoes of Lexington, Massachusetts, told us that his business doesn’t pay commission “because of the competition it creates among the staff, especially surrounding dealing with other sales associates’ returns.” The owner added, “I want my associates to be attentive to the non-sales work and I want them to pass on a sale if it is the wrong thing for a customer. We do set weekly sales goals and if the team makes the goal, they get a bonus.” 

An anonymous retailer from Florida noted, “The one thing that has changed is the addition of direct to consumer (DTC), which has greatly altered the traffic we would usually see coming in our door. To combat this, we have established bonus dollars based on monthly sales quotas for the entire floor so the entire sales team is involved in achieving sales goals and growth together.” This retailer is a strong advocate for “building good team unity in which everyone must push each other to hit goals and everyone shares in the benefits.” 

Jim Robeson, owner of SAS Shoes of Riverside, California, cautioned that “commissioned sales are for employees that understand the incentive associated with it.” Jim felt that younger salespeople don’t understand commissioned pay systems.

There was also strong support for maintaining a commissioned based pay system, and comments from these industry veterans:

Peter Sachs, General Manager for outdoor brand LOWA Boots offered up this analogy, “You eat what you kill! Otherwise, sales people sell the easiest and usually lowest priced merchandise.”

John Dhondt, independent wholesale sales representative, made these comments, “There are many pros and cons to commission when competing in a store. You get what you pay for. One of my favorite lines an old shoe dog shared with me years ago was: ‘Pay Bananas and you get Monkeys’”.

Gary Heflin retired retail western wear operator and independent rep, posted this comment, “The success of commission sales depends entirely upon the sales force. If you have order takers, no commission. True sales people are motivated by money and competition. I don’t think you can teach desire and the will to excel. I don’t know a percent increase number for you, I just know sales will increase. The ideal setup for me is all sales personnel are commission and you have a sales manager that does not compete with the sales force. He settles disputes, fairly and efficiently. He also helps to close sales if necessary. His salary is determined by the stores total sales.”

In Support of Commission

An industry veteran stepped forward and emailed me an extensive set of comments in support of operating a commission-based pay system. 

Maurice Breton, retired CEO of Comfort One Shoes, Manassas, Virginia, is well known as a strong supporter of commissioned sales floors. Although his content was considerably more extensive, I have summarized his position as follows:

Commission is good!! However, the shoe store owner must consider the type of organization, service level, and working environment he wants his store to reflect.

A formalized “up system” is critical. The manager or lead person on the floor must manage the up system.

• Don’t go to commission without a up system or it will fail. Excellent training is paramount to running a proper commission-based store. 

• Commission sales does a fabulous job of building loyalty to your store, and to each and every sales associate.

• Commissioned selling leads to fabulous one-on-one relationships with the customer.

• Commission sales people must keep a private book on customers which is critical to building a business. Prior to trunk shows your professional, commissioned sales associate, well call their private customer list. That is the best marketing you can possibly have, and it’s only achieved with a commission-based system. 

• There is no way your store will be in the upper quartile of industry performance in terms of multi pair rates, inner-sole attachment rates and accessory penetration rates without commission.

If you think a team commission scheme is appropriate, you’re wrong, in my view. 

• You will never be able to retain performers in the upper quartile of the industry without commission.

• You will never attract, and/or, retain highly productive people in your organization with the team commission system. 

• People that produce at the highest level of sales in the industry must be compensated at the highest rates. 

• Additionally, commission has no top rate. Quite simple - the more shoes you sell,  the more money you make. Your income is dependent on you and your very own performance skills and attitude.

Making Sense of it All

There were also comments from some who straddled the fence and tried to make sense out the current employee culture …

William Nettleton, Store Manager, Modern Shoe Provo Utah, stated, “Only true salespeople like commission, the ability to grind and earn more. The ‘Quiet Quitting’ culture of those coming now into the workforce believe they can do what they want when they want to but still be considered valuable to a company. The phrase ‘the grass is always greener…’ is something many people I have interviewed believe, so unless the culture is correct to engage with an employee long term and be more than just a paycheck, it doesn’t matter what you pay them – they will leave searching for greener pastures.”

Jim Newman, Yellow Box wholesale sales representative and former retailer, previous NST Chairman, and previous NSRA Board Member, called me and said this, “Dealing with employees out there today, everyone is different. People in the age group of 25 to 40, at the height of their working careers, aren’t motivated in the same way my generation was. Longevity is limited, many current employees will keep a job a short time until something better comes along. Maybe you need 2 to 3 different pay systems. A good manager has to recognize what motivates one employee different than another.”

Commentary

Those who are against paying commission as part of their compensation plan insist that the hassles and conflicts with maintaining the appropriate business culture outweigh the benefits. I felt those that made comments expressed their position well and I must admit that their fears and concerns are largely real. Yes, employees will be competing against each other. Yes, some unintended results will be problematic. Therefore, yes, it is certainly a hassle to manage the various issues! 

However, those of us who favor compensation systems based on commission insist they produce increased sales and profits for the business. You are in business to make as large of a profit as possible, are you not? Isn’t your quest for additional profit worth dealing with employees and the commission issues?

The following goals might be best achieved through commission-based pay systems:

• Maximum Average Transaction: If your goal is to sell the highest volume in purchases to each and every customer, commissions provide for consistent encouragement for employees to maximize selling presentations, according to the proponents.

• Longevity: If a compensation-based system is enacted and managed with care and attention, owners can benefit because it helps employees reach their personal income goals and that leads to longevity. What better way to retain employees than to pay them based on the value they generate within the business? The longer employees are with any company, the more they understand the offerings and the larger personal consumer relationships they create. Therefore, longevity leads to more consistent and rewarding customer service environments. 

• Employees receive feedback:

Commission-based pay systems require accurate and timely statistical reporting and that will require the employer to manage a system to calculate, analyze and issue reports. Employees crave feedback. What better way to give feedback than to issue periodic reports of an employee’s average performance with each customer?

• Good Behavior: If good behavior is measured by good customer service and good customer service is measured by the customer going home with the maximum bag of merchandise that they will be happy with, then commissions encourage good behavior.

While those who favor commission-based pay systems advocate for them, even the strongest of advocates advise that managing a commission-based pay system requires a lot of careful thought, intense supervision of the selling floor, and other considerations. 

Commission helps identify the core business value each employee brings to the table — who is able to influence customers to buy or who isn’t able to or can’t. Any shoe store owner would benefit his business by recognizing quickly which employees are simply not a fit. Most employees prefer that their lazy or incompetent fellow employees leave the company. What employees hate is performing better than another employee but being paid the same. 

However, commissions must also work in harmony with your company culture, which tells your staff how to treat customers and how to work well with each other. Hopefully, your staff are all can-do, will-do, enthusiastic, ambitious, positive, collaborative and dedicated toward your company’s success. If they are, you will also find an appropriate and manageable way to compensate your staff accordingly.

Alan Miklofsky is a semi-retired shoe industry veteran and contributor to Footwear Insight. This is his sixth article. After a 40-year award winning career as a retailer, long-term board member of the NSRA (which included a stint as its Chairperson), Alan is currently a business consultant.

For more information on Alan, visit his LinkedIn page at: https://www.linkedin.com/in/alanmiklofsky