Assuming you’ve a shiny new plan that everyone is convinced is the answer to all of your growth challenges for next year, then I’ve three questions for you that might give you pause for thought.
Why a new plan?
Sorry to be a party pooper but the notion that a new commission plan will substantially solve sales performance problems is a fantasy. I’ve led both direct and indirect sales teams and worked with sales leaders for more than 20 years and have never yet found either the perfect commission plan nor one that in truth made very much difference! Often the worst thing you can do is change what you’ve already got in place. The lag in performance while the team understands (and normally moans about) the new plan is generally not worth it. It is much more likely that your problem is in not having the right salespeople/leaders/channel partners. I have found repeatedly that the best salespeople thrive no matter how the commission plan works and that you can throw any amount of money you like at poor salespeople but funnily enough they stay poor – and continue to bitch about the plan, the product, the price, their customers, the weather…
Easy to calculate?
Spreadsheet jockeys love commission plans! The opportunity to create accelerators, decelerators, tiers, nil bands, etc, etc is myriad and intoxicating. It’s also a joy for different departments to wade in where customer satisfaction becomes worth 4.67% of the total, new product X has a special extra $10 for each time you mention it, referrals to department Y need to be made or the plan ratchets back. Some plans also work to keep salespeople on a short leash/treat them like children by not actually revealing the $ result until the end of a 12-month period. In the end the plan is like a slot machine with 25 dials and where you can never get ’25 cherries’. The very best plans are unbelievably simple and allow a salesperson to calculate quickly what a transaction or performance in a particular (ideally short) period is broadly worth to them.
Far too often commission payments are treated as a cost to be controlled rather than an investment to be maximised. People from some departments go around worrying about the salespeople taking advantage of the plan and so create ways to monitor and limit payments to stop those greedy salespeople earning a penny more than they are due. If you operate like you resent paying commission then I have a wild and crazy idea. Stop paying it. Plenty of organisations don’t pay sales commissions and they seem to do OK. You’ll need to get much better at recruitment and pay much bigger salaries but the upside is that you’ll need no more byzantine systems to serve your Scrooge-like mentality! If that’s not for you then you’re really going to need to get over your commission paranoia. Great salespeople loath working for organisations that don’t trust them and will find another paymaster as soon as they can, so don’t be surprised when they leave. Equally, great salespeople know how to maximise a commission plan so don’t be surprised if you end up paying out more than you expected. Whilst I appreciate you don’t want to employ crooks, don’t you want smart people who know how to legitimately maximise their earnings??