Questions to Ask
Before we get into the nitty-gritty, it’s important to understand the basics of a sales commission. That’s why we’re diving into the questions which cut to the heart of the what, when and why of how these structures work.
Here are the best questions to get you started:
Why should I use a sales commission structure?
Commissions are common in the sales world. Why? External motivators, such as financial incentives, are a great way to motivate people doing repetitive tasks, according to this article from ScienceForWork. Selling is an art, but it also involves a lot of cold calling and tedious email sending.
There are many other situations where this payment works particularly well. It’s appropriate for companies looking to target a few specific products or sell during a short amount of time. It’s effective in bringing a team together to work toward a group reward, building cohesion and galvanizing staff.
Once a commission plan is in place, managers can oversee and help employees achieve their goals. Unfortunately, this is where confusion and poor recording can cause issues. No one wants to muddle the waters with miscommunication, errors in calculations and poor transparency. Tempers run high when money is on the line.
Fortunately, this is where software helps the most. Before we talk about that, however, let’s get our definition straight.
What worked well in past plans?
Before planning for the future, it’s always best to gather as much data as possible. Analyze and survey staff about past structures. What’s worked best? Where did challenges arise? Besides examining data, survey the staff. Which plans made them feel the most motivated? Did any of them cause undue stress?
Does the plan align with your company’s budget and sales goals?
Make sure your commission structure ties into your strategic planning. Whether your goal is to expand one portion of the company, grow your market share or tighten your margin, the plan should support it. Encourage behaviors that correlate with overall objectives.
Teams can either use cascading goals, where sales derive their goals directly from the company’s strategic plan, or use objective key results where each department creates goals that support the plan, even if they don’t directly tie in.
Are you paying your reps fairly and avoiding turnover?
If turnover has been a big concern in sales, it’s definitely time to reevaluate compensation. Does your staff feel adequately compensated and appreciated for their work? Are the goals attainable? Is it overly complicated? Is it in line with the rest of the industry? If you’re losing a lot of staff to competitors, it might be an issue of payment. Keep your ear to the ground to ensure equity.
Does your plan account for high and low performers?
It’s a mistake to create a plan that can only be achieved by one or two staff members. Make sure that your plans are designed so you still have enough revenue if a high performer leaves. While you should push lower performers, you don’t want to discourage and demoralize them. By the same token, there must be worthy rewards for the best of best so your top talent doesn’t get poached away.
How do I choose the best structure for my staff?
There are a few steps necessary for discovering the best type of plan. The first thing a team must do when tweaking the structure is make a clear set of goals and priorities. What behavior are you looking to encourage? Are you more interested in expanding territory or landing big accounts? Are you looking to control expenses or create more collaboration? Once that’s decided, it’s easier to see which plan gets the job done.
Second, it’s always necessary to look at the current data. Identify trends, metrics, benchmarks and areas that need improvement. Then, be prepared to track the same measures over a period to see what’s working and what’s not. Combine goals that target productivity and in-house objectives with broader business goals.
Third, make sure the plan is consistent with the industry. You don’t want to shortchange your staff or choose something that’s completely off base. Keep current on the information. What are the trends? What metrics are making the most difference for the big players? Keep updating the plan semi-regularly to adapt to sudden shifts.
Fourth, consult your sales team. Your best brainpower comes from the people out in the field every day. You never know whose diverse background can come into play in the most surprising way. Everything works best when everyone is on board and is happy with their compensation. What better to get them excited than letting them help design it?