What Managers Need to Know About Commissions

BY Kathy Crosett
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Are you worried that your top sales rep is seeking greener pastures? Earlier this year, a report from TinyPulse revealed that over 40% of employees would leave their current positions for a pay boost of 10%. You sure don't need that happening in your sales organization. One way to keep your sales reps happy is to find the right balance between base pay and commissions with plenty of upside.

The Case for Commissions

Every sales rep is familiar with how these systems work. But not every system is the same. Industry experts believe you can go wrong in a couple of ways with your commission system. 

Some business leaders deliberately cap what a sales rep can earn. They mistakenly believe that when other employees find out how much a star rep is making, they’ll be demoralized. You’ll need to handle this situation with some frank discussions. Remind other employees that without the star rep's efforts, you would not have enough money to pay everyone else. If you limit what a good rep can earn in your company, you’ll demotivate them.

The Simpler The Better

Your sales reps need to understand how the commission part of the compensation package works for them. They won’t need you to explain the base salary portion of their pay. But they do need to easily grasp how the commission portion kicks into their bottom line. For example, a straight-​line commission plan will allow them to earn 80% of their commission when they achieve 80% of quota. If they sell 120% of quota, show them how they’ll bring home 120% of their commission.

The Agreement

It might be tempting to discuss these details over a handshake once your candidate accepts your verbal offer. Go one step further and write out what you agreed on. In larger organizations, you need this formality, along with written definitions of the territory the rep will be covering. This is also the perfect time to set your documentation expectations. Your rep should agree, in writing, to use your CRM and other systems to track their progress on every account.

Beyond Commissions

Once your rep starts work with the right expectations and pay structure in place, keep coaching them. C. Lee Smith, President and CEO of SalesFuel notes that proper coaching of top reps, especially with respect to a future career path in the organization, will also help you win their loyalty.