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July 01, 2010
Probability Measures to Incorporate into Commission Pay Plans

David Wudyka discusses the probability measures for revitalizing pay plans in a BLR webinar entitled ‘Commission Pay Plans: How to Motivate Your Sales Staff in a Roller Coaster Economy’. He explains that another step that organizations can use in revitalizing their Commission Pay Plans (CPP) involves using probability measures and incorporating the same into CPPs. Here's a short (but not exhaustive) list of other profitability measures you should incorporate into your CPP in tough times:

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  • Pay lower commissions for discounted sales
  • Pay higher commissions for sales that carry higher-than-usual margins
  • Offer different bonuses and commission levels for products with different profit margins (one size does NOT fit all!)

Employers can add extra pay to sales representatives for selling a suite of products or products with recurring revenues. Reward sales representatives whose sales help you reduce expenses e.g., better terms negotiated with a high-volume but low-margin client, clear out product that's in stock, or that minimize expensive customization or special deals. Don't pay premiums for simple ‘ticket taking’. Try not to pay residuals on repeat orders, unless real selling or ongoing customer service by the sales rep is actually taking place or, at least, consider paying a higher level on initial sales, with lower rates for repeat sales.

David Wudyka, SPHR, MBA, BSIE, is the founder and managing principal of Westminster Associates (www.westminsterassociates.com), a Massachusetts-based human resource and compensation firm that specializes in pay, performance, and productivity issues. He brings more than 30 years of professional HR and compensation experience to the table for clients around the country. He speaks and writes frequently on HR and compensation issues, and he earned his master’s degree from Syracuse University.

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