Splitting Sales Commissions

I recently joined an online discussion about commission splits, a topic I was constantly dealing with back when I was managing a large, global sales organization of about 200. At the time, we had one customer that had factories in several Asian countries, in Europe and here in the US in two locations. All of the actual Purchase Orders came out of their California HQ, but it turned out that this was just their process and most decisions and negotiations were done locally; “most” being the key word. So, every time we received an order, both the US Sales Person and the Asian or European Sales Person claimed 100% of the commission. And it was left to me, the VP Worldwide Sales, to decide what and how to do the split.

What finally worked out to be the fairest, at least according to my logic back then, was to award 1/3 to where the actual decision was made, and the price negotiated; 1/3 to where the order was placed (sometimes there were some discussions there too); and 1/3 to where the equipment was shipped. This last part was very important, because that was where the support had to come from – whether from the local sales person or the local Field Service group.

I am not saying that this solution was “perfect”, but everyone bought into it and the constant bickering stopped; we set quotas according to this spit too. The reason why I am writing this now is because in the online split topic I referred to earlier, several people were promoting paying double commissions – something I believe to be illogical and unnecessarily expensive.