Commission only sales as a re-invention of sharecropping

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I was asked in a recent job interview about how frequently I have received raises or asked for a raise. I had to think about that for a moment. I have always worked in jobs where I can get a raise by delivering more newspapers, painting more houses, turning more tables, selling more advertising, selling another loan, working longer, working harder or producing more.

My answer was that I have never worked anyplace where you would ask for one or expect to receive one. I have always worked for tips or commission. From my perspective a salary with a bonus structure is a novel and enticing concept. Health benefits and a vacation plan that allows top sales people to take more than 3-4 day increments at a time would be delightful. With 10%+ unemployed nationwide, a salary with benefits has wide appeal these days.

Sales jobs are challenging. I was initially attracted by the potential to maximize my income based on effort rather than at my employer’s discretion. After 20 years of mad scrambling for the next table, the next client, the next sale and the next close, I have become jaded about this commission only arrangement. The recession may have exacerbated my surly demeanor, but the seeds of cynicism were sown several years before the current economic downturn.

Despite having made a lucrative living plying my verbal skills, the principle underlying this employer/employee arrangement is fundamentally flawed. Essentially I invest in the employer rather than them investing in me. If I successfully demonstrate a knack for representing their product/ service and bring them money, then they give me a slice of it in the form of commission. Until I successfully bring my employer money, I get nothing regardless of the time or energy invested. Greater risk equals greater return. The dilemma is that if you are highly successful as a salesperson, then that is the role that every company wants you to take in perpetuity. You can almost see the dollar signs in the pupils of the interviewer when they realize that they may have found a diamond in the rough, like a leprechaun who has finally found the pot of gold at the end of the rainbow.

Unfortunately sales jobs require a few years of solid effort to build a base.  The first few years tend to be lean compared to future earnings. Age and financial obligations may require a more financially conservative approach than a commission only sales career affords.

I realized several years ago that society recycles old practices with new labels every few decades. Commission only sales jobs are little more than a modern reinvention of share cropping.

Sharecropping has a long history. There are a wide range of different situations and types of agreements that have encompassed the system. Sharecropping in the U.S. was an agricultural labor system that developed in Georgia, and throughout the South, following Reconstruction. Share cropping emerged from the plantation system. Landowners had ample land but no money for wages and former slaves had no education and no money. The cropper provided labor and the landowner provided land, animals, equipment and seed. Croppers marketed the crops and maintained the accounts in return for a portion of the money realized from the sale of the harvest. From this portion expenses due to the landowner were deducted.

The particulars of sharecropping agreements differed from place to place and over time, but generally those workers who could offer nothing but their labor made arrangements that overwhelmingly favored the landlord. If a sharecropper could provide something other than labor, a mule or seed, then they might be paid a slightly larger percentage of the crop at the end of the season.

Land was not, however, the only thing sharecroppers needed from the landowner. The landowners operating the state's largest plantations would sell fertilizer, seed, clothing, shoes and some food at the plantation store. Croppers working smaller operations bought these necessities from local merchants. Croppers rarely had cash. They were extended credit to make purchases. After harvesting the crop, landowners gave the croppers their portion, often forcing them to sell it straight to the local merchant or back to the landowner to satisfy the accumulated seasonal debt.

High interest charges, emphasis on the production of a single cash crop, dubious accounting and chronic cropper irresponsibility were among the abuses of the system. The system was virtually eliminated by mechanical advances in farming and the reduction of acreage dedicated to cotton in the middle of the 20th century.

Our modern economic system is based on monetary flow and the use of credit to fund new enterprises with the assumption of success, ability to repay and continued growth and prosperity…forever and ever, amen. Money is the crop.

Salespeople lubricate the cogs of capitalism, peddling products far and wide. We facilitate the movement of goods, services and, therefore, money, through the economic system. If you are a salesperson with a proven track record, a book of prior clients and well networked, you can typically negotiate a more lucrative commission split. It is the equivalent of having your own seeds and mule.

Though this modern day implementation of sharecropping goes by a new name and differs in nuance and application, the system operates in a similar fashion. The salesperson plants the seeds (leads, cold calling, appointments, etc.), tends the crops (follow up), harvests the crop (closes the deal) and delivers it to market. The employer establishes what the crop will be (product/service), the type of fertilizer that will be used (ahem) and the portion of the harvest to be shared (commission). The goal is to maximize profit while minimizing labor cost.

Given that we are in the midst of a recession, businesses do not have the capital for significant labor outlay. Commission only arrangements reward performance while insuring that profits are generated prior to labor costs being incurred. To get the economy going again, businesses have to keep operations lean and mean. I understand why this employment model makes sense for employers. I also understand that soldiers fighting on the front lines of war have a high mortality rate.  Understanding does not make that realization a less disconcerting, disillusioning and disastrous epiphany to the soldier.

For superstar sales people, there is no more lucrative line of work. Others make a decent living and remain motivated by the dream of hitting the same numbers as the superstars. For many sales is an exercise in futility.

Though a significant number of our industrial and manufacturing jobs have been exported or eliminated, jobs in service based professions and sales have increased. That shouldn’t be surprising. Consumers aren’t buying, because they have no disposable income in an economic environment of heightened uncertainty and fear. Every company needs to increase sales to stay in business. For the prospective job seeker, there are loads of sales jobs available, from unscrupulous and shady 'get rich quick' schemes to legitimate sales rep positions. All operate on a nominal base + commission or commission only basis.

Depending on the product or service, the commissions may be due and payable long after you close the sale. Think of it as not getting paid until after harvest. If anything should transpire between harvest and payday, you may not get paid at all. You assume all of the risk in the employer/employee contract for a nominal slice of the pie.

Things to keep in mind when considering a commission based sales opportunity:

• Employers cannot set hours for commission only employees. Though employers love to tell you what hours to work, they are not legally allowed to do so if they are not paying you a wage.
• All commission arrangements should be documented, signed and kept in a safe place, though employers can change commission arrangements whenever they wish. Commission only arrangements do not afford the same level of protection and transparency as salary/hourly.
• Track your commission and costs (if applicable). Accounting/payroll errors are commonplace. If you are responsible for covering any expenses, make sure you keep itemized records or can get itemized accounting documenting all expenses accrued.
• Ask about benefits. Sales professions frequently offer limited benefit packages (or none).
• Inquire about the vacation policy. If the company you are considering offers an enticing vacation package, find a delicate, indirect way to inquire about the last time one of their top people took off more than a week. The top salespeople are often discouraged from taking prolonged vacations. Absence of the top performers correlates directly to a loss in business, sales and profitability (the cropper is not available to tend the crop and harvest).
• The further removed you are from accurate details pertaining to expenses, costs and profits, the smaller your piece of the pie. You are effectively the sharecropper with nothing more than labor.
• The nature of commission only sales is that success is based on maximizing the harvest. Depending on the product/service sold, there are numerous other individuals profiting from your efforts. At the end of the harvest you owe the company store. If you are a top performer, it is no big deal. You take your cut, buy your seeds and prep for the next round. If you are low on the sales food chain, then there can be so many hands in your pockets that you feel violated every time you see your paycheck.

Sales jobs are not for the risk adverse. If you choose to accept a commission only position, take the time to do your research and ask the interviewer a lot of questions. Internet research on the company and the principle players (CEO, President, etc.) is worthwhile. HR professionals are paid to attract talent. Often the interviewer is another form of salesperson. They are far more likely to emphasize the pros and to marginalize, or omit, the cons. If an interviewer or business owner is interested in enticing you to pedal their wares, they tend to tell you what they think you want to hear and to wax poetic about how glorious the product/service/company is and how much money you can make if you work hard. It is usually a misrepresentation of reality.  Though it can be a profitable and lucrative career, the commission only arrangements require that you are consistently aware of the need to represent and protect your interests.

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