They say choice is good. Obviously, they have never put together a sales commission plan. Commission plans come in a million varieties - and each one's a disaster waiting to happen. This week, Engage offers some tips for steering clear of commission calamities.
In one way, commission plans are the hammer of the sales manager's motivational toolkit - almost every company uses them to build revenues and reward excellence. But unlike the implements that hang from the average handyman's belt, commission plans come in millions of shapes and sizes. Instead of picking what you need from the shelf at Home Depot, you're expected to work the millions of combinations and permutations into a commission plan of your own. Each is new, unique, and a disaster waiting to happen.
Countless commission structures fail despite the best intentions of
business owners. Many plans are too complicated to be properly
understood or effectively implemented. More fail when sales managers
don't explain their plans properly. The result: everyone comes up with
their own interpretation of the rules, and forms a unique opinion of
which customers and commissions they share. Before you know it, inside
sales is battling with field sales, direct reps are at the throats of
the channel team, and you're caught in the middle of the fray. Selling
time is wasted, morale plummets and salespeople start to resign. That's
no way to grow a company.
In 15 years of selling, I've never encountered a compensation plan that
eliminated all conflicts. But with careful design and reinforcement of
cooperative relationships, you can have a commission plan that works.
Here are things to consider:
1. Keep your plan simple. The more complex the compensation
plan, the easier it is to misunderstand or manipulate. For example, if
your salespeople are assigned to geographic territories, be sure to
develop and communicate clear guidelines on how they can sell to
accounts that cut across territories, and how they'll be rewarded for
those sales.
2. Understand the plan and all its rules yourself. Review and
edit the plan with your sales manager, and bring a non-sales manager
into the discussion for a different point of view. Together, you should
anticipate the questions your team will have and prepare solid answers.
Remember: your salespeople will check whether their potential
compensation might decline under the new plan. If that's the case, be
prepared to defend the changes.
3. Make sure everybody knows and understands the rules.
Introduce the plan a couple of weeks before you plan to implement it,
giving your team a few days to digest its contents. Then hold a group
meeting to discuss it. Meet with each salesperson privately to
reinforce the plan and address questions and concerns that weren't
raised before the group. Ask your people about the plan to check for
understanding.
4. Encourage team building to ward off conflict before it starts.
Have competing reps (for instance, inside and outside sales) meet to
establish relationships and build trust. The most successful teams
always engage with their selling partners.
Bring teams together to discuss potentially problematic accounts. I
have seen some plans that actually required an agreement in writing of
how customers can be approached, by whom, and how the commission will
be split.
One more thing: your sales team will behave exactly according to how
the plan best rewards them, concentrating their efforts on what pays
the most. If you have a specific objective (e.g. new customers, more
repeat sales, higher levels of customer service), then you must reward
the behaviours that pursue those goals. Lucky for you, you have no
choice.
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