<i>Dear Workforce</i> What's the Secret To Equitable Commissions
April 9, 2004
Depending on the type of customers you want to find and retain, is it important to differentiate the two?
What type of customers from specific markets, territories, and industries do you want to sell?
How important are future sales and longer term plans? How does this factor into your growth expectations and annual targets?
Is there a cost factor that makes some deals more profitable than others? If there are expenses incurred in securing deals, you may want to include the evaluation of profitability on sales.
You should define the total compensation package you would expect to pay a salesperson who meets preset goals. This is to ensure you are not under-compensating or over-compensating any one individual.
As mentioned before, you should determine if any one salesperson has an unfair advantage over another--not in terms of skills but in terms of pipeline of customers. Are good territories and/or customer lists given to a minority of salespeople? If so, this would make it easier for that one salesperson to meet his/her revenue targets. You can either re-divide the sales territories/customer lists or acknowledge this and define a different incentive for new vs. old customers to level the playing fields.
A "commission pot" may work well. You can rank the importance of each of the factors (revenue, pipeline, customer type, etc.) and create a total percentage of base pay. You could, for example, have a commission pot of 50 percent of base salary. This would be paid periodically if a salesperson meets the overall goal.