What effects can a commission structure have on a business?

The sales sector is all about staying ahead of the competition, and to remain competitive, you need to have the best people working for you. A commission scheme is a tool used by most sales organisations as an incentive to help drive performance, but also to boost employee engagement. However, how do you know if your commission scheme is right for your business? We can help you define your commission scheme and what you should be offering to attract and retain top sales professionals. 

The different types of commission structure

Sales commission is a vital aspect of sales compensation. It is the amount of money a salesperson can earn based on the sales that they make. There is a wide range of commission structures used by businesses in today’s market. However, there are some key things to consider when pulling together a competitive commission model for your business.

Time/Frequency: Over what period do you want to reward/pay out a commission to your sales team?

Typically, this would be a choice between monthly, quarterly, and annually. The key thing to consider here is the length of the sales cycle. As an example, a monthly commission is fairly common and can work well in fast, transactional sales models. But, a longer sales cycle of over a month might be better rewarded quarterly. Annual commission/bonuses are becoming rarer but can work well in more account management focused roles.

Commission versus bonus: Do you have a clear reward scheme? 

Your reward schedule must be transparent and regimented, whether it be bonus or commission based, your employees should know how they are rewarded. It can be as simple as £X amount of revenue is equal to X% of the commission. Alternatively, you should consider whether a bonus model based on various criteria might work better for your business.

A minimum threshold: Is there a minimum amount of sales?

Consider whether or not a minimum amount of sales should be determined. Enforcing a minimum sales amount will mean that when a professional first starts, they have a clear goal to reach so they can start earning a commission.

A tiered structure: Are there thresholds in place?

Putting accelerators or thresholds in place to allow top performers to increase the percentage of commission they earn once they get over a certain target is another way to drive your sales team and really push people to exceed targets.

Capped vs uncapped: Do you want to limit your team’s earnings?

Capping a sales person’s commission can be a dangerous game. If a person knows what target they need to hit to get paid their maximum commission, there is no incentive for them to drive past that target and exceed expectations. As long as an organisation has calculated a commission structure that is financially viable for them, there shouldn’t be any need to cap the earnings of their top salespeople. 

The importance of a comprehensive sales commission scheme

Implementing a competitive and comprehensive commission structure is key to your sales plan. A good commission scheme can raise the bar, drive performance, and help attract and retain top talent. On the other hand, a badly planned commission structure can leave your employees feeling demotivated, disheartened, and underappreciated. Perhaps unsurprisingly, this often leads to professionals looking for other roles where they feel more rewarded.

Designing your commission structure

There is no one size fits all model to designing a commission structure. Therefore, you must outline what your offering can and should look like and highlight what would work best for your business. It is important to consider the types of professionals that you are looking to hire and recognise what they typically want out of a commission scheme.

The golden rule is to think about what activity you are looking to reward and base your model around that activity. The way you reward a new business professional should be different from how you reward someone whose role is based around account retention and growth. The model should be clear and transparent so that everyone is on the same page and knows what to expect. 

What can a top commission structure do for your business?

• Drive performance and activity in the areas that are important to you.
• Increase revenue for a business.
• Make your business more attractive to job seekers.
• Improve retention of your best people.
• Improve customer service levels.
• Improve account retention.
   

If a commission scheme is created correctly with both the business and your people in mind, it should lead to a happy workplace with happy professionals working within it; and perhaps more importantly, happy clients.

If you want to hire top talent to your sales organisation, get in touch with your local Page Personnel office today for a confidential chat with one of our specialist recruitment consultants. Alternatively, if you are looking for new career opportunities, create a MyPage account today.