HR Pulse




Menu Style

Home Day-to-day Issues Incentives Are Sales Commission schemes really driving business results?

Are Sales Commission schemes really driving business results?

Kim Lombard

In most cases, sales commission schemes are the tightly guarded secrets of sales management and how they work is not really understood or even released to the greater business. You have to ask yourself why, when so many interrelated parties are either part of, or affected by these schemes.

I believe the answer lies in the fact that a lot of sales managers tend to think that if they release the ‘secrets’ of their scheme to too many parties, they are giving away their secrets of success. But I contend that this is not the case.  Sales compensation can be simple and effective and should be transparent and clear to all who partake and all who have a vested interest, even those who need to support the process.

When well designed, sales compensation plans and the results they measure and wish to drive, are actually translatable across industries and across continents. One only needs to understand the basics, what you want to achieve and then designing a plan that actually gets you to that business result.

Sales Compensation Ownership

It is usually the sales manager who hold the sales compensation plan close to his/her chest with the viewpoint that valuable and tightly guarded secrets are going to be lost if others get to see or understand how the plan works. But in actual fact there are so many parties that need to be involved to ensure that the plan works efficiently and effectively that it is short sighted to believe that the ownership only lies with sales management.

For instance, wouldn’t it be correct to say that marketing plays a huge role in creating the demand for the product(s) at specific times and are therefore intimately involved in some part of that ownership?  In the same light the Reward specialists also need to ensure that the plan is in line with the overall reward philosophy and does not create internal inequities that derail the whole reward strategy. Finance wants a sound compensation plan, Legal wants minimal risk and then the IT departments have to ensure that they can support the sales management scheme with accurate data and reports in order to ensure that the sales team continues to focus on the results, rather than being derailed by not being able to see where they are in relation to the target that they are being measured against. Essentially Sales Management is responsible for the day to day management and measurement as this is their job function, however the CEO is ultimately responsible, as he has to ensure that the business delivers the results and manages the financial costs for the organisation and its shareholders.

Is your sales force being focused on doing the right things to achieve business results?

Are your sales consultants actually doing what they should in order to achieve business results or are you incentivising a behaviour that may produce some results but ultimately not achieve the targets you need to achieve?  This is where it all starts. It is the understanding of what each role must achieve and then incentivising that behaviour in order to ensure that you are enabling that specific sales resource to achieve what they need to. It is no use having several measures for success when too many measures means that the reward for achieving one measure is diluted by the low weightings that are needed to sustain so many measures. 

There are some simple rules and steps to ensure that you motivate and drive behaviour to focus on what is important in order to get to and sustain success. Amongst these are understanding what the sales role must achieve, focusing on three or less measures, getting your leadership to understand what is important and continuously communicating this, ensuring that the support structures and processes are there to enable and not distract the workforce, and being transparent about what you measure, how you measure and what you reward.

Gone are the days where the sales compensation plans are tightly held secrets that only a few were privy to. Sales compensation today requires us to be transparent, aligned to the overall reward philosophy and strategy and must ensure a collaborative approach where all parties involved are clear on their roles and understand how to either contribute to or support the sales force in achieving the success for the whole company. Your greatest mistake is not being able to provide this clarity to your high performers as they will either stop performing until you provide the clarity they need, or jump ship and create success for another organisation where they can gain that clarity, and in all likelihood it will be for a competitor.

Kim Lombard is a co-owner of Synntech People Solutions and is an experienced HR and reward consultant. She holds degrees in industrial and clinical psychology and is a certified Global Reward Professional. Kim has over 18 years' experience across a broad range of business functions within both local and international organisations in the banking, project engineering, construction, manufacturing and human capital industries. Kim has experience in all aspects of the HR, remuneration and reward environment concerning the creation of reward philosophies and strategies, employee value propositions, sales commission schemes, cost-to-company conversions, pay scale development, market positioning, HR business support, creation of HR policies and structure, recruitment as well as people development.