I was recently on a panel at the Inc. 5000 conference with Ultra Mobile CEO, David Glickman, Big Ass Fans CEO, Carey Smith, and PinnacleTechnical Resources CEO, Nina Vaca, and while the panel was on achieving sustained revenue growth, someone in the audience asked a question that brought up a great conversation: What are the best practices to building commission into your sales comp structure?
David, Cary and Nina all had different thoughts on how to compensate a sales team, while I believe there's only one way to do it: your way. You have to choose a compensation plan to incentivize the types of behavior you want your people to have.
While there may be many ways to do this, if you don't stick with one way, you will have turnover, or worse, rumblings in your sales department. As you all know, there are structures made up of base pay and commission. Others have just a base salary, and some companies operate strictly off of a commission-based plan.
The first step to establishing what structure is right for your team is to figure out what you want to incentivize your people to do, and what types of people you want to make up your sales team.
Some are motivated by incentive trips. Others value a one-time large payout at the end of the year. And others want monthly or quarterly commission plans to earn as they go. Put a system and metrics in place based off the activity you want to see-then compensate them for the results.
One panelist said they only believed in base salaries because salespeople by nature aren't honest. Another said that while that may be true, you still want to have a commission plan that still incentivizes them.
My belief is that with true transparency, day-to-day, week-to-week and month-to-month feedback, any salesperson can succeed and be honest if a sales structure is clearly defined and commission is paid out on the agreed upon timeframe. If you hire the right people who are incentivized by the structure in which you created, you will achieve the desired results.
At my company we have base salaries, commission and bonuses. Commissions are paid out quarterly and are based on the revenue of individual performances. If employees bring in higher revenue quarter over quarter, their payout increases. Employees who have exemplary performances are given a one-time payout at the end of the year.
Everyone is given a goal at the beginning of the year, and those who achieve this goal receive an additional bonus. While not perfect, this structure has always worked well for us, and motivated our salespeople to grow their business and to have honest dialogue.
Where most companies fail is they change compensation structures too often and they hire people who aren't motivated by a commission-based plan.
I'm old school. What we do at LaSalle Network may be "old school," and quite frankly, we'll never stop doing it, because it works. We pick up the phones and cold call. We go building to building and door knock. We send hand-written letters.
We teach people how to sell and build relationships and the results prove that the methods work. We created a compensation plan that rewards these efforts, and in turn, the sales cycle is created. Listen. Learn. Execute. Earn.
So at the end of the day there's only one true sales commission plan that works: the plan that you lay out in clear communication to your sales team. Month by month, quarter by quarter, explain to them what their payout is, why they received it, and continue to incentivize them for the work you wish to receive.