What points should one consider while desigining a comission structure for sales team?


7

I envision to create a sales team that can make sales while keeping customer satisfaction as the top priority. I want to develop a team that is good at sales but is not pushy. Are there any available techniques that can help me design a commission structure that motivates my team to make sales while keeping client interest as one of their major objective. How can I create such a team or such a spirit?

Sales

asked Oct 20 '09 at 02:51
Blank
Joydeep
185 points

3 Answers


6

It sounds like you need a team of good sales professionals. A good sales professional understands the importance of customer satisfication and repeat business. But like all other industries, the majority of participants are average or below average. The "pushy" type of salespeople you're thinking of are like the developers featured on The Daily WTF.

When it comes to salespeople, the disconnect that many entrepreneurs seem to have is that, like all other talent, good sales people need to be attracted to you; they won't just come to you because you're offering a job with "unlimited earning potential". There are a lot of factors that go into attracting talent, but the compensation is pretty important and the key to that is fairness.

Salespeople are almost like you and I in that they saddle the "traditional employee" and "entrepreneur" roles. They need to know that, should they kill themselves over demolishing goals and, in turn, making you boatloads of money, they too can make boatloads of money. But they also want to make sure that, in a slow period, they can still feed their kids and pay their mortgage.

Keep in mind that all sales are basically the same (7 steps, yadda yadda), but differ on a lot of variables. These are what to base your commission structure on.

  • Product Complexity - how complicated will it be to master the products? how long before their sales knowledge will be sufficient to make serious sales?
  • Sales Cycle - what is the average sales cycle? 1 week? 6 months?
  • Pricing Structure - pay up front? monthly cost?
  • Lead Sourcing - are you providing the leads? are they expected to hunt for them?
  • Service Required - are they the account manager once the sale is made? how many hours a week is expected on maintenance?
  • Market Potential - what is the total market? $100M? $100B?
  • Sales Goals - what are the goals? are these at all realistic?

All of these need to be considered when developing your commission structure. Consider...

  • If your product is super complex and the average sale is a $500K deal that takes 12-18 months to close, then the base salary will need to be pretty high, and the commission may only be 2-3%
  • If your product is a couple thousand and take a few weeks to sell, then maybe a 50/50 split in terms of base/commission is in order

And the list goes on and on. I would suggest starting with your sales plan (how to make sales, average sale, etc), and then figuring out how you will have people sell it.

answered Oct 20 '09 at 07:42
Blank
Alex Papadimoulis
5,891 points

2

I've written a blog post about this here:

http://blog.businessofsoftware.org/2009/09/are-sales-people-different-from-you-and-me.html Essentially, I think commission can easily contradict customer satisfaction. Not everybody agrees.

answered Oct 20 '09 at 05:12
Blank
Neil Davidson
1,839 points
  • I think of salespeople as half-entrepreneur, half-employee. Most salespeople mix the worst of both worlds, but the really talented folks (upper 20%) make the world go round. I'd be concerned that, by removing one's ability to control his compensation, you're nipping the entrepreneurial side in the bud, and thus lose folks who see it like you do and can become your best ally. – Alex Papadimoulis 7 years ago
Add Comment

1

Neil and Alex have good points to make; let me add a viewpoint from my contract programming days when I designed commission systems for 3 large companies you would recognize the names of:

  1. The sales people will always game the system: you job is to design a system that they can only game in the direction you want, quarter by quarter and year by year.
  2. If the sales people are on some sort of salary, you will have some sort of quota. Quota inflation deters good sales people from joining and staying with you. Increasing the quota has to be based on some sort of observable facts, not just "we want more money."
  3. See #1
answered Oct 21 '09 at 03:10
Blank
Bob Walsh
2,620 points

Your Answer

  • Bold
  • Italic
  • • Bullets
  • 1. Numbers
  • Quote
Not the answer you're looking for? Ask your own question or browse other questions in these topics:

Sales