In a BLR webinar entitled ‘Commission Pay Plans: How to Motivate Your Sales Staff in a Roller Coaster Economy’, David Wudyka discusses the use of profitability measures to maximize an organization’s sales results, which in turn can revitalize an organization’s Commission Pay Plans (CPP). He states that too many sales employers simply pay based on a percentage of gross profit dollars or gross sales dollars. Instead, employers should mix things up and link sales pay to specific goals:
- Instead of paying x% on gross dollars, tie part of the commission to a specific goal for new accounts opened, as product-specific bonuses, or as a reward for sales quota achievements
- Stagger commissions and bonuses based on the progress made toward hitting quota levels
- Instead of paying x% on gross dollars, tie part of the commission to a specific goal for new accounts opened (e.g., ‘$100 for every new account’), or as product-specific bonuses (e.g., ‘an extra 2 percent commission on every Product X that's sold this quarter’), or as a reward for sales quota achievements (e.g., ‘an extra $500 for every quarter this year in which you hit 100% of your quota’)
- Stagger commissions and bonuses based on the progress made toward hitting quota levels. For example, you might pay 10% commissions on sales up to 50% of the quota ... then, 25% commission on sales from 51% to 100% of the quota ... and 50% on sales exceeding the quota
- Doing so provides a much stronger incentive for your sales reps to go above and beyond expectations
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.