Compensation or incentive plans?

Instead, I will address some of the challenges which I often hear.

- Why do I have to pay SDR, AE, CS, SE, management,… Aren’t I paying multiple times for the same deal? Well, kind of, but that’s not the way to look at it. Firstly, if you pennypinch on commission, you will disenfranchise your sales team and lose motivation and people. Secondly, it is easy to structure your sales costs to reflect your business needs. Each individual has an expected on target commission (OTC) – the amount they will earn if they hit the target. Provided that all of the OTCs of all the relevant roles add up to a reasonable % of your revenue, you are fine. Even if multiple people get paid on the same deal.

- My team are gaming the commission plan, why aren’t they lined up with the business? The most common reason is that you have set up the plan to incentivise certain behaviour, and your team are exhibiting that behaviour, but that’s not what you wanted. Poor plan creation, likely with unexpected consequences. It is very important to think through the consequences of different aspects of your plan, especially if you have floors (minimum revenue needed before earning commission), accelerators (increased commission for over achievement), SPIFs (time-bound incentives for particular activities).

I might write a blog soon on organisations that have no commission at all – typical in Japan, but starting to show its head in US and UK, and likely elsewhere.