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May 06, 2010
Strict Revenue Sharing: Good Sales Compensation Strategy?

In a BLR webinar entitled "Sales Compensation Strategies: How to Motivate and Re-Energize Your Sales Staff in a Challenging Economy," Dan Kleinman, principal of Dan Kleinman Consulting, a compensation and human resource consulting firm, explains the risks of a strictly revenue-sharing or commission scenario. He says that in a strictly revenue-sharing scenario the sales person is typically:

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  • Independent
  • Focused only on earnings
  • Personally oriented rather than company oriented

In such a scenario, the sales person owns the book of business. The customer associates with the individual rather than the company, which means the company is:

  • Vulnerable to turnover
  • Pushed into uncapped earnings potential
  • Has no effective way to link the salesperson with the company

It's possible to minimize vulnerability and maximize compensation flexibility when the company "owns" the book of business:

  • Through a company-wide team orientation
  • Through a reward structure that recognizes team

Dan Kleinman is the principal of Dan Kleinman Consulting, a California-based compensation and human resource consulting firm. For the past 18 years, he has served as an independent consultant for a broad spectrum of regional, national, and international companies, providing compensation, performance, organizational planning, and reward-system design services. He may be reached at info@dankleinmanconsulting.com.

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