Design a commission plan that drives sales.

• Author: Mathiesen, Sandy
• Position: Sales Commissions

If you establish and oversee the commission package for your company's sales force, you should consider numerous components to create a plan that both fairly compensates and adequately motivates the sales team. Ultimately, your plan should keep your salespeople happy while supporting and advancing company goals.

GROUND RULES

You will find that methods for creating a compensation plan vary widely and often reflect industry-specific standards. However, some ground rules cut across industries and they can provide a framework for establishing or reviewing your company's sales incentive package. Some of the more important rules include:

* Start with the outcomes and behaviors you want to foster;

* Prioritize behaviors;

* Keep the incentives flexible so that they can evolve along with your company's goals;

* Make the compensation plan easy for everyone to understand;

* Benchmark your competition to stay competitive; and

* Review regularly for relevance.

START WITH RESULTS

Of fundamental importance is to determine what results you want to encourage and to design your plan from there.

A sales team's goals should reflect the company's larger goals. Consider reprinting corporate goals in your sales agreements to underscore a unity of purpose. For additional clarity, you may want to include work objectives, even if they are not tied to commissions.

SOME CARROTS ARE LARGER THAN OTHERS

Every incentive in a commission plan is a carrot, but some carrots can be larger than others depending on the behavior they reward. Prioritize the behaviors you want from your sales force. You then can set up a system of rewards that encourages top-priority behavior, as well as motivates salespeople for situations that are clearly distinguishable.

For example, you may want to commission third-party products at a different rate. You also might consider commissioning services differently than products.

You can implement an accelerator plan, which provides flexibility in the commission percentage earned and paid. In this case salespeople are paid at a lower rate until they meet their target.

After that, they are compensated at a more accelerated rate for every dollar they generate in excess of the target.

KEEP IT SIMPLE

A commission plan needs to be easy for your sales team to understand. Not only do sales people need to see clearly what is motivating them, but you don't want to spend your time haggling over commission payments.

Clearly identify how commissions are earned...