No more Shadow Accounting: Better Approaches to Sales Commissions
A one-size-fits-all approach doesn’t work when it comes to paying sales reps. Organizations often find it difficult to appropriately compensate their sales people. When paid too little, it becomes difficult to retain the core sales talent that is crucial for fueling growth. On the other hand, paying too much directly takes a toll on your ability to scale and your organization. This is the reason why sales compensation should be approached as a delicate balancing act, in which organizations must find the middle ground i.e. pay the sales rep ‘enough’ to keep them motivated to deliver results and fuel growth.
For most sales reps, their paycheck depends on their job performance because their salary is partially or wholly linked to a sales commission. This means that sales rep have more control over their earning potential. Based on how good a salesperson is and how successful he or she is at executing the organization’s sales goals, earning an uncapped amount is possible.
However, it is important that the organization’s commission structures allow sales reps to make a considerable amount of money through sales commissions. This is the reason it’s important for organizations to develop commission plans that suit the style and compensation needs of the sales reps and keep their strengths and weaknesses in mind. Following are some effective approaches to sales commissions.
Straight salary allows employees to determine up front the amount of money they can earn per year. Unless the contract is re-negotiated, an employee’s pay cannot be changed. With this approach, the sales performance of a rep determines their salary. Furthermore, they can expect a set amount of money in the bank each month.
Salary plus bonus
One of the most reliable sales pay structures, sales plus bonus pay a pre-determined salary to the sales rep each pay period. Furthermore, an employee receives an additional bonus if they hit or exceeds sales goals. Sales performance has no influence on this approach.
Salary plus commission
One of most common form of sales compensation, salary, plus commission pays a pre-determined and fixe annual base salary to a salesperson. The number of completed sales determines commission earned. The best thing about this approach is that sales reps are guaranteed a steady income stream from their base salary.
There is no base salary in a straight commission compensation model. The only way for a sales person to make money is earning a percentage of each sale. The benefit of this approach is that the sales rep is entirely in control of the amount of income he or she earns.
Depending on whether sales goals have been exceeded and how much, the rate of commission goes up and down in variable commission. This is what makes it different from straight commission. The better the performance is, the more money a sales person can earn. This is the biggest motivating factor of this approach.
With better approaches to sales commissions, companies can motivate sales people to deliver results and fuel growth. You can drive sales performance with commissions. You can learn more about CallidusCloud Commissions by visiting our commissions page or watch our commissions product tour.
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Top 10 Questions to Ask Your ICM Vendor
- How do I settle comp disputes?
- How many people can be credited for a single sale?
- Can your application keep up with my fast growing needs?
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