The Commission Conversation

I have long been a passionate proponent of commission only sales programs (including draw against commissions).  While revisiting the wide ranging reality of the sales professionals’ role and interactions with their organizations as they produce and help grow the business, I have had a significant change of heart.

The notion that most sales professionals are solely responsible for their growth efforts is, in many cases, outdated and misapplied.  In most businesses, the salesperson now relies on a team of resources to assist them with the client acquisition and management.  That they act in concert with the commitment, support, and dependence of a team does not make them solely responsible for, or deserving of, a compensation system that rewards merely one aspect of their role — results.

This is not to say that all commission only or commission intensive compensation programs are inherently outdated.  I am merely articulating an altered philosophical and business perspective that recognizes that sales professionals are not the only people participating in the growth process.  Further, their role is often merely not dependent upon or limited solely to new business activities or results.  If that is the case in your sales model, exclusively or significantly rewarding them for bringing in new business is financially inappropriate.  Hence, your compensation model is likely giving undue credit or overemphasizing a desired behavior  or expected outcome.

Defining what the compensation model is for a sales professional in your organization, I would examine and understand the following first:

1. What the sales process is:  Map out the entire sales process from lead generation through qualification activities to proposal generation to strategic development and planning to close.

2. Who else gets involved:  Understanding those people that have become part of the process is a required informational piece.  Before you can reward anyone for the results of the organization, you need to know what their specific roles, accountabilities, contributions were in relationship to the sales process.

3. What the post-sales relationship looks like: After a prospect becomes a client how does the organization supports and nurtures that relationship.   Again, take a close look at roles and process to understand the responsibilities and contributions of the various individuals or groups are in association with that process.

4. Define the financial allocation for new business and retention: In other words, assign the variable compensation the organization is willing to allocate to the results associated with both growth and retention. This figure is usually derived from a component of the percentage of gross profits associated with growth and retention.

5. Create a financial model that provides incentives to everyone: I am a firm and passionate advocate for the highly interactive, engaged and empowered team.  Compensating a lone-wolf sales professional solely on production that is dependent upon others does not bring strategies and teams together — it divides them.  Offer performance-based, performance-related compensation models to the team and reward the team for their outcomes.  This puts the sales professional in a leadership role to manage strategy, process, and the internal/external relationships necessary to steadily grow revenues.

While some compensation models may be perfectly suited for a commission only program, I do not embrace the notion that one-style fits all in the ever-changing sales arena.  Before you start drawing up a compensation plan understand your process, know who plays a critical roles in your growth model, and reward your team for the successful contributions for both growth and retention.