Is It Called “Salary” or “Draw”?

When we talk about needing to approach potential salespeople with new ways to think about sales, we’re not just talking about the pay plans themselves. Even the terminology used can make or break whether a potential recruit joins your organization and becomes a rock star salesperson, or walks out the door looking for better opportunities.

I now this seems like a matter of semantics, but words are powerful.  You can either build bridges or burn them with words.   When you get to the point with a potential new hire where it is time to talk about pay plans, just say the words, “draw against commission” and watch the spark in their eyes fade.  The word association for “draw against commission” in their ears is “my take home pay on a monthly basis could fluctuate”. When job searching in today’s market, people are looking for stability.

On the other hand, the word salary is associated with stability.  And while “salary” might just be the buzzword the industry is using for the same thing, the ideas it represents are important.

Today’s salespeople want the security of knowing they will have a set income they can count on — their salary. Now, they are perfectly fine with making a bonus commission if they sell above a certain number of cars, but they don’t want to make less if they have a bad month.

It might be tempting to brush off the distinction as something only those who are fresh-faced, coming to you from high school or college, care about. But the fact is that this trend started with Generation X — who are now in their 40s. Only those who are beginning to think about retirement are still motivated by pay plans that rely on draws and straight commission. If you want to attract sales people who aren’t in the 55 or older category, you’re going to have to rethink the terminology.

But this isn’t all bad news. Going with a salary model can actually cost the dealership less in the long run. By offering a salary that remains constant until a set level of car sales is reached each month — a number that can be higher than if you were offering straight commission — the ceiling for earnings is actually lower. But today’s salespeople are willing to make that trade — they would rather give up a few thousand dollars in potential cash for the security of knowing they will never make less than the base salary. Happier, secure salespeople and more cash for the dealership – that’s not a bad trade.

For dealerships to thrive, they need salespeople who are in the prime of their selling years. They need to attract not only the fresh-faced newbies, but the seasoned pros in their 30s and 40s who have made car sales their career – those who are passionate about it. It’s easy to write off terminology as unimportant, but the reality is, the dealerships who move to a salary model will win the loyalty of the best and brightest the industry has to offer, while those who cling to a draw structure will wonder why their sales team is a constantly revolving door.