I had a conversation with a sales manager the other day who was railing against his company for changing the commission plan. He was hot about it! He said he was making less money compared with last year and it wasn’t fair. The sales team achieved 130% of quota the previous year and he felt they were being punished rather than rewarded.
As we talked, it occurred to me, he wasn’t upset because they changed the commission plan or because he made less. He was mad because he no longer had any control on what he could make. What gave it away was he said he was actually making more money this year than he would have IF they hadn’t changed the plan. I asked him why was upset then, it appeared the plan was working in his favor. It wasn’t about the money he said, it was the fact that they changed without thinking and that he had less influence on his commissions now than he did before. He couldn’t his control income. The new plan paid him on too many things outside of his control.
Making sure sales people can control their income is without a doubt the most overlooked component when companies build commission plans. There are a number of critical elements to commission plans. (I wrote about it here on Fred Wilson’s AVC blog.) However, making sure sales people feel in control of their destiny and their income needs to be at the core.
The key element of a commission plan is to motivate sales people. If there isn’t a direct correlation between an action and a result there isn’t control. Sales people have to know that by achieving x, they get y. Nothing complicated, nothing confusing. Commissions aren’t bonuses. Commissions compensate individual sales people for the what they accomplish personally.
Commission plans need to give sales people as much control as possible. Don’t tie commissions to events sales people have little control over. Make them direct and responsive to sales actions. Build sales plans rewarding your sales people for what they themselves accomplish. Reward those who work harder, are more creative and accomplish the most.
If your sales people make money on things they have little to no control over you’ve got the wrong plan. Go fix it and give your sales people control. They will reward YOU for it.