Every business wants to find that fuel that will accelerate the sales engine. Often, they turn to sales commission as the solution. Done correctly, commissions can be that foot on the gas that your organization needs; however, commission-based sales also create new challenges for organizations, and making changes to existing commission structures can cause dissatisfaction in the team. Find out how to structure commission to ensure that your implementation is a success.
- Set a High Commission to Salary Ratio
One of the most obvious ways to incentivize your sales team to sell more is to increase their commission. The trick to doing this is to adjust the ratio of commission to salary. You may consider increasing commission to salary from 50:50 to 70:30, for instance, which will certainly have a huge impact on the sales team’s motivation to close deals. It is very likely that you will receive pushback from members of the team when you introduce an extreme increase in commission; after all, your team is going to be concerned that they will take home less money. However, the strongest sales reps will thrive with this structure, and the weakest will self-select out.
The type of product you are selling and the industry you are in should be taken into consideration with these adjustments, as your sales reps should be commissioned in line with the influence they have over the sale.
- Create Tiers in Your Commission Structure
Often, the difference between achieving average results and excellent results comes down to having an extra push. After months or years in a job, most people get into a comfort zone and stop pushing themselves; not because they are lazy, but because they have become comfortable with how to do their job. To incentivize your team to push until the very last deal is done, you should create commission tiers. For instance, you could attach your typical commission rate to the first $100,000 in monthly sales, and a higher commission multiplier to the next $50,000. You could apply the higher multiplier to all of the rep’s sales for the month if they hit a certain target. When reps know that putting in that extra effort to close one more sale will result in a much higher paycheque, they will push beyond their comfort zone and accelerate sales.
- Create a Culture that Helps the Entire Team for Hit Targets
Organizations often try to incentivize sales teams to work together by giving additional commission to everyone on the team if the whole team hits their targets. While this is a well-intentioned practice, it is usually implemented incorrectly and results in politics, gossip, and hard feelings. Team members that do reach their goals feel robbed them of the commission, and they blame the team members that didn’t hit targets. The key to successfully implementing a team commission structure is to create a culture that supports collaboration and working together as a team. Allocate time for the team to help each other, train, and share best practices. Reward high performers for sharing their knowledge, and make it known that management looks highly upon team members that help others succeed. Finally, if it does become clear that one or two team members are consistently missing targets and failing to improve, remove them from the team. Allowing these members to stay on the team will breed resentment among the other team members who do perform.
There’s no question that commission is an effective carrot that helps sales people push to close that final deal. However, it is up to your organization to provide the support, culture, and tools that they need to get across the finish line.