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Sales Staff Commission Schemes
So is it really all about the money?!! Undoubtedly good sales professionals are looking at incentive and commission schemes to drive them onto higher sales performance. Sales commission schemes, bonus schemes, or annual bonuses are the norm as part of a sales benefits package. Yet, there is little information available to help companies looking to redesign or introduce new schemes. In this article, we detail various ways to devise commission schemes that work but also look at other ways to recognise and reward top performance. We hope that it has a few ideas in it that could be right for your business. To find top staff worthy of the commission scheme, you may want to see our guide on hiring top talent.
Why Doesn't One Scheme 'Fit All'
It is very difficult to generalise or to propose a panacea commission scheme, as what works for one company may not work for another. However, within this article, we offer a handful of ideas for you to construct the best sales incentive scheme for your team and business.
The right method is entirely based on your company culture and the type of way you secure sales, the 'toughness of the sale' involved, the level of the employee's input required to secure sales. It also has to be based on the size of orders won, the GP within these deals, the amount of competition and many other contributing factors. However, it must be remembered that commission schemes need to be kept simple to achieve the objective of driving sales staff to greater sales performance.
Within reason, it is common to pay a lower basic salary (than employees at a similar level within your business) and higher bonuses or commission that will often take the overall package to be higher than other staff members. With increased risk, daily rejection and other obstacles in their path, it is quite right that top sales professionals should earn more than staff in other departments. If you don't recognise, incentivise and reward your top sales performers, you will undoubtedly lose them. We've got a handy tip-sheet on motivation too.
It is worth considering alternative benefit schemes; while financial incentives play a significant role, our article on non-financial rewards can help shed some light on alternative motivators.
The Goal in Devising a Commission Scheme that Works
For the employee, the scheme has to be clear and motivational to serve the purpose of driving them on to bigger and greater revenue numbers. From an employer's perspective, it has to be sensible (i.e. not paying bonuses on bad business) and be easy to calculate.
Monthly or Annually?
An idealistic commission scheme for sales employees would be monthly and annually - perhaps an annual override for exceptional performance (as each payment term motivates different behaviours).
Paying sales employees monthly commission incentivises immediate action. Because the selling environment for many companies can vary seasonally, implementing a monthly commission programme offers management the ability to react to changing market needs and trends rapidly.
Annual commission drives consistent top performance, particularly if it is an accelerated scheme based upon achieving more than is expected of the sales professional. If an annual commission scheme is implemented, it could also be based on total company performance so staff can promote each other's behaviour and be held accountable for helping to achieve the company's principal objectives.
If multiple salespeople do the same job, their commission compensation schemes should be equal. Mr Williams would not be pleased if he knew that his colleague Mrs Avery received a better compensation scheme. This could provide friction within a team and could consequently lead to higher levels of staff turnover. However, you might want to reward salespeople through higher base salaries for the length of service, experience or exceptional performance. But, most importantly, be very, very, very clear with all of your sales staff and apply any differences consistently.
When you choose a payment system for your business and sales employees that pays by results, you will need to consider whether to top up workers' earnings with payments such as commission, bonuses, tips and gratuities.
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by Darren Dewrance
About the author
Darren spent six years in sales and field sales before joining the original sales recruitment specialist, Austin Benn, in 1998. After achieving the status of top consultant, out of about seventy at the time, Darren rose from Senior Consultant to Operations Manager of the commercial sector before leaving to join a London based Headhunter in 2003 before setting up Aaron Wallis with Rob in October 2007.
With a natural leadership style, Darren is an expert on putting his finger right on the heart of the problem. His natural commercial instincts have helped hundreds of employers make better recruitment decisions. Darren is married with two children, and when not at work or with his family, he likes nothing more than to be on the side of a river or a lake with a rod in his hand.
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