Take a look at the following headlines. Your company certainly doesn’t need this type of online publicity! But how can you make sure your sales incentive program (which you know is 100% fair!) isn’t hated by your reps?
To deliver an effective sales commission program, you must implement key administrative mechanics (ex: budget, compliance, payroll, etc.). However, taking the rep’s perspective into account is equally important.
You don’t want your reps to feel screwed out of sales commissions, start complaining, and quit. To avoid this, you must take into account sales psychology, and take control of your incentive program by deploying rep-focused countermeasures.
#1 – Why can’t you pay commissions on time?
Rep – I don’t care about your administrative delays. You don’t realize this, but I do have bills to pay! I don’t want to incur any late fees or end up in a bind. I’m also starting to worry about our company’s financial health since commissions are often paid late.
The fix:
- Leverage automation to enable fast re-calculation of commissions
- Pay the bulk of commissions now – deal with minor adjustments later on
#2 – Why are you trying with withhold my commissions?
Rep – Why are you telling some of my “earned” commissions won’t be paid until actual payment has been received from customers? It feels like you want to hold my commissions hostage. I want to get paid now. Obviously, I’m OK with a deduction if a deal falls through.
The fix:
- Avoid declaring as “earned” commissions which aren’t going to be paid immediately
- Consider paying commissions upfront – use clawbacks or deductions to handle cancellations
#3 – Where are those crazy quota numbers coming from?
Rep – The latest quota numbers look very challenging, to say the least… Are you trying to artificially reduce sales commissions by setting impossible goals? And who set those crazy quotas anyways – our investors, our CEO, our VP of finance, our VP of sales?
The fix:
- Clearly explain who was responsible for setting quotas
- Describe the methodology used to set quotas (ex: budget, forecasting, etc.)
#4 – Why are you trying to make commissions statements impossible to understand?
Rep – Why are you sending me Excel spreadsheets with 8 tabs and some hidden formulas? Can’t you realize I’m NOT an Excel expert? Which special conditions are you burying within those Excel formulas? Are you trying to nickel-and-dime on commissions?
The fix:
- Eliminate commission spreadsheets
- Simplify commission plans as much as possible
- Document and explain every calculation using examples
#5 – Why are there so many overrides?
Rep – I hate it when you manually cap eligible revenue for large deals. I don’t believe you should be able to arbitrarily override amounts like this. I’m also starting to wonder if others on the team aren’t getting preferential treatment through special overrides.
The fix:
- Make overrides truly exceptional (ex: require multiple levels of approval)
- Don’t cap compensation for large deals
#6 – Why is my commission payout trigger so high?
Rep – I understand NOT receiving any commission until I’ve paid for my own base salary. But why I need to reach such as high number before I’m eligible for meaningful commissions? As soon as I’ve paid for myself, I should start earning commissions.
The fix:
- Avoid all-or-nothing commission triggers
- Include a lower commission rate for lower levels of attainment
#7 – Why do you always forget to credit me for some deals?
Rep – I can’t stand it when I work hard to close a deal, but it somehow isn’t taken into account. Are our systems completely broken, or is this intentional? Do you really want me to spend hours calculating my own commissions to ensure they are correct?
The fix:
- Use an automated system to ensure proper crediting and calculations
- Provide reps with an easy way to check crediting of transactions
#8 – Don’t forget about my career!
Rep – Sales commissions are important to me, but I also want to know how I’ll be able to increase my overall earning potential. As my manager, don’t just focus on commissions. Help me reach for the next level and grow my career.
The fix:
- Some reps may seem obsessed with commissions, but they also have career goals
- Always talk about all aspects of compensation – base pay + commissions + benefits
In Conclusion
Even the most perfect incentive program can be hated by well-intentioned reps. It’s your responsibility to understand the rep’s mindset and deploy countermeasures to prevent confusion or anger. And, while you’re doing all this, delight your reps by investing in a fully automated sales commission solution!
Sales Commissions Explained 