The 9 keys to structuring your team's sales commissions
Posted: Thu Dec 26, 2024 3:53 am
Commissions are basically the financial benefits that a sales agent receives every time he closes a sale . This practice, so widespread today, is actually nothing new: its origins lie in the first trades of the Roman Empire.
Although this type of incentive is given to all types of teams, with all types of objectives, the truth is that sales teams are the ones that have historically used this compensation system the most. Their mission? To incentivize the achievement of a specific objective.
In his book Drive , renowned motivation expert Daniel H. Pink reflects on whether there are better ways to motivate a team than goal-based commissions, since it is easy for the rest of the organization's objectives to take a backseat. However, the author admits that this model may fit best in sales departments (or similar) .
Typically, there are two types of sales agents in companies: internal sales teams , which usually have a base salary and a variable part on commission, and external or intermediary teams , which work entirely on commission. For this article, we are going to focus on commission systems for internal teams.
Just like in chess, the rules of the game seem simple, but then the game gets complicated. So now we have to consider what the basic requirements are for your sales commission system to work. Let's get to it!
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Requirements for a commission system to work
What are the keys to making a commission system effective and not a source of problems?
1. Simplicity
A simple commission system is one of the main requirements, above all, for two reasons:
So that the salesperson knows clearly and directly what they are achieving with each sale , something essential if we want to minimize misunderstandings between the company and the salesperson.
To make life easier for the company and prevent sales managers from wasting hours calculating commissions.
Our recommendation is that you start by creating a simple system because it will inevitably become more complicated over time. Tell your team that you are going to start like this for now and, as the months go by, you will be able to validate and optimize the system together.
2. No limits
Our second piece of advice is to keep the commission system unlimited . In some companies, cfo email list the
Your team’s goals should be aligned with your company’s , and your commission system should reflect that. After all, the more your team sells, the better, right?
Creating a limitation on the sales team harms the entire system as a whole, and probably means that there is some misalignment between interests or objectives.
Although this type of incentive is given to all types of teams, with all types of objectives, the truth is that sales teams are the ones that have historically used this compensation system the most. Their mission? To incentivize the achievement of a specific objective.
In his book Drive , renowned motivation expert Daniel H. Pink reflects on whether there are better ways to motivate a team than goal-based commissions, since it is easy for the rest of the organization's objectives to take a backseat. However, the author admits that this model may fit best in sales departments (or similar) .
Typically, there are two types of sales agents in companies: internal sales teams , which usually have a base salary and a variable part on commission, and external or intermediary teams , which work entirely on commission. For this article, we are going to focus on commission systems for internal teams.
Just like in chess, the rules of the game seem simple, but then the game gets complicated. So now we have to consider what the basic requirements are for your sales commission system to work. Let's get to it!
Do you like what you're reading? Subscribe to the blog!
Email *
your email
I have read and accept the Privacy and Cookies Policy .
Requirements for a commission system to work
What are the keys to making a commission system effective and not a source of problems?
1. Simplicity
A simple commission system is one of the main requirements, above all, for two reasons:
So that the salesperson knows clearly and directly what they are achieving with each sale , something essential if we want to minimize misunderstandings between the company and the salesperson.
To make life easier for the company and prevent sales managers from wasting hours calculating commissions.
Our recommendation is that you start by creating a simple system because it will inevitably become more complicated over time. Tell your team that you are going to start like this for now and, as the months go by, you will be able to validate and optimize the system together.
2. No limits
Our second piece of advice is to keep the commission system unlimited . In some companies, cfo email list the
Your team’s goals should be aligned with your company’s , and your commission system should reflect that. After all, the more your team sells, the better, right?
Creating a limitation on the sales team harms the entire system as a whole, and probably means that there is some misalignment between interests or objectives.