A sales commission structure establishes how much an organization will pay its salespeople for each individual sale or KPIs accomplished. Rewarding your team according to their performance is key to building a strong and healthy work relationship.
When planning your commission structure, you need to consider different factors that are key to developing a solid action plan, elements such as the following:
- The amount of budget considered for the commissions.
- The different levels of sales output.
- The commission's rates.
- Base salaries.
- Potential incentives or bonuses.
Providing these incentives with a well-structured reward system can inspire behaviors that will make both the company and your team happy.
Earlier this year, members of the Forbes Business Development Council revealed their biggest tips on how to make a commission structure work efficiently. We are sharing with you our five picks of their recommendations in order to work on a successful commissions plan:
1. Create A Reward System Centered Around Commissions
I would tie commissions to reward new business acquisitions. New business is harder today for sales and clients. Too many choices, too much information, and market uncertainty—if a salesperson can penetrate this, they deserve the best. In B2B business, repeat sales owe themselves more to brand performance than salesmanship, so it doesn't make sense to reward customer retention over new business. - Wajid Mirza, Arthur Lawrence
2. Be Clear About How Much Money Will Be Made
Your guiding principles should be to align compensation with KPIs, including top performers, and be transparent. If driving expansion vs landing new logos is more important and if you already own the market share, reward expansion with a higher comp rate. Pull your top performers into the process. They will be your champions and communicate the "why" behind the design elements, so they are bought in. - Rebecca Myrick, Anomali
3. Give Employees A Choice On How They Want To Receive Payment
Try offering a set of compensation structures based on the needs of the individual. You could have a high commission/low base plan, a high base and low commission plan, and a middle ground with a flexible work environment. Just be clear up front that they have to choose what is right for them for the year. Personalized plans drive motivation, but you don't want to have to renegotiate later. - David Mattson, Sandler
4. Inspire Your Team To Reach The Ultimate Goal
Your structure should encourage the areas of growth that are needed for your company to be successful and if you are public the key areas the street is looking for. Mapping this to metrics that can be achieved will ensure a winning culture with the least amount of attrition. - Donald O'Sullivan, Pegasystems
5. Present A Healthy Balance Between The Goal And The Reward
With sales, it’s not just about driving objective outcomes, but the key to setting up a commission structure for the sales team is to balance the intended outcomes with the counterintuitive behaviors such a structure may trigger. In other words, the structure must protect itself from "perverse incents" (underpinned by the cobra effect phenomenon). So, objectivity is important, but balance is the key! - Sudeep Sarkar, Revature LLC
Check the full FORBES article here
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The best part is that your sales reps will be able to keep track too, with the Listaso Sales App being easy and intuitive to use, all your sales reps will be able to use it to check their monthly performance, goals, target percentage, commissions and the total amount of sales and earnings.
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