What do you do if your company's sales commission structure is inefficient?

1 Assess the current situation

The first step is to evaluate the current state of your commission structure and identify any issues or gaps. This can be done by analyzing data, feedback, and results from your sales team. When doing this, you should ask questions such as how your commission structure compares to industry standards and best practices, how well it aligns with your sales strategy and objectives, how clear and transparent the rules and calculations are, how satisfied and engaged your sales reps are with it, and what kind of effect it has on their behavior, productivity, and retention.

3 Design a new commission structure

The third step is to design a new commission structure that supports your desired outcomes and incentivizes your sales team. To do this, you should choose the right commission model, rate, and frequency. For example, the flat rate model is a fixed percentage of the revenue generated by the sales rep. Alternatively, the tiered rate model is a variable percentage of the revenue generated by the sales rep based on their performance level. You can also opt for a revenue vs. quota model, which is a percentage of the difference between the revenue generated by the sales rep and their quota. Lastly, there is a profit margin model, which is a percentage of the profit margin of the deal closed by the sales rep.

4 Communicate and implement the new commission structure

The fourth step is to communicate and implement the new commission structure to your sales team and other stakeholders. You should explain the rationale, benefits, and expectations of the new commission structure, and provide training and support for your sales team. It's important to communicate the new commission structure clearly and consistently, providing examples and scenarios of how it works and how it affects the sales rep's income. Additionally, you should solicit feedback and suggestions from your sales team and other stakeholders on the new commission structure, while using reliable and user-friendly management software for sales teams to track and calculate the commissions accurately and efficiently.

5 Monitor and evaluate the new commission structure

The fifth step is to monitor and evaluate the new commission structure and its impact on your sales team and your business. Gathering and analyzing data, feedback, and results of your sales team is essential. To do this, you should compare the performance and satisfaction of your sales team before and after the new commission structure. Additionally, assess the alignment and effectiveness of your commission structure with your sales strategy and objectives. It's also important to identify the strengths and weaknesses of your new commission structure, making adjustments as needed. Finally, it's important to celebrate and reward the achievements and improvements of your sales team under the new commission structure.

6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?