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Why Do You Pay Commission?
April 11, 2021 | By Neil Ducoff | 2 Comments
This is not a simple question. Commission has been the defacto pay method at salons/spas forever. For most, “commission” is the way it’s done.
The most common response to the question is, “Commission motivates them to perform and sell.” But does it really?
Commission’s origin is actually in sales-based businesses and industries. If you sell something, you get paid a percentage of that sale. Products, cars, equipment, systems, real estate, services, etc.. The key difference is that the one earning commission doesn’t make or deliver the product or service being sold.
The salon/spa industry is very different because the individual doing the “selling,” or providing the actual service, gets the commission. That seemingly simple difference is far from simple — it’s massively different.
Stylists, estheticians, barbers, massage therapists, nail techs, and other service providers are primarily attracted to our industry for its creative and therapeutic aspects — not because they’re passionate about “selling” or making a commission on what they sell.
- If they’re good at selling, they thrive. Yes, talent and personality are important, but it’s their selling ability that drives earning potential.
- If they’re not good at selling, they can struggle. When they say, “I’m not a salesperson,” they’re being honest.
In its very basic form, commission makes sense. You only pay employees when they “sell or do” something. (Note: Straight commission is a big no-no if it doesn’t meet minimum wage requirements for hours at work.)
The commission employee’s basic interpretation of only being paid when they “sell or do” something sounds like, “I’m not doing anything I don’t get paid to do.”
FACT: Commission creates a piecework mentality because that’s exactly what working on commission is — piecework.
Commission is so embedded in the industry thinking that owners routinely describe their business as being a “commission salon/spa” rather than an “employee-based salon/spa.” If you have employees, you’re an employee-based salon/spa. Commission is nothing more than how you pay.
If you pay commission, consider the following with an open mind:
- Commission isn’t the motivator you think it is: Too many owners think commission will do the heavy leadership work for them. It can not and will not. Remember the 80/20 rule. The 20% that strive to perform will excel. It’s the 80% that needs coaching, inspiring, pushing, and correcting to perform to the expectations of your company. There is no “set it and forget it” on commission, or any other pay method.
- Commission is sales-driven — not behavior-driven: Every
commission paycheck is based entirely on an employee’s sales. It doesn’t matter if that employee is chronically late, has a bad attitude, dismal client retention, ignores rules, or totally opted out of selling retail. Even if you have a level system, commission pays for a lot of the behaviors that frustrate owners and contaminate cultures.
- Commission doesn’t drive retail: Commission on retail gives
employees the choice to sell or not. It doesn’t matter how high retail commission is, if they don’t like recommending and selling retail, they’re OK not getting the retail commission. But if guest services sell a product to one of “their” clients, they will have a fit if they don’t get the commission. The “who gets the credit” nonsense kills retail sales. Think about this: Salons/spas that use our Team-Based Business Model have consistently great retail sales and pay NO retail commission.
- Commission is all about individuals building themselves — not company building: Question: Does every employee in your salon/spa strive to hit your company’s monthly goals? If not, why not? Commission is an “I/me/mine” pay method. It’s driven by request rates and service providers building their own clientele. What do owners fear most? Busy service providers leaving with “their” clientele. Booth rental and the rapid rise of suites were built on the clienteles that commission paid them to build.
- Commission is individual pay — not team pay: Everyone is beating the “culture” drum. Everyone wants “team” and “teamwork.” Commission, by design, puts teamwork second. If you want team, you must pay team. That means each employee’s pay rate must reflect their contribution to culture and teamwork as well as their individual performance. No matter how you spin commission, it will always be a percentage of individual sales.
- Commission payroll is difficult to control: Ask owners what a good commission rate is, and you’ll get all sorts of “commission-based” responses. Some still say 50%. Many say 45%. Many say you need to have a product charge. And there are countless level and sliding scale methods. FACT 1: The real answer is, what can the company afford in payroll after all expenses and desired net profit are factored in. FACT 2: Once commissions are set, increases in operating costs shrink profit. FACT 3: On commission, every time you raise prices, you’re giving automatic raises — even to those that didn’t earn a raise.
Here’s my challenge to you: The intent of this blog post is not to beat up on commission. It’s to pull back the curtain on the inherent realities of commission pay.
For over 27 years, Strategies has been teaching its proven Team-Based Business Model.
- It is not commission.
- It does not mean “everyone earns the same pay”, because that doesn’t make sense.
- It is driven by leadership, future-focused planning, well-designed
systems, fiscal responsibility, critical numbers, and teamwork.
- It provides the framework to build a company, with a dynamic team-based culture, that can provide growth opportunities for all employees.
You owe it to yourself and your team to fully explore our Team-Based Business Model. It is so much more than just a pay method.
🗓 Schedule a free 60-minute strategy session to start building your Team-Based salon, spa, or medspa: Click Here!