It doesn’t matter if you’re a Business Processing Outsourcing centre, or run an internal sales force – having a well thought out commission structure in place is essential. A good structure makes targets challenging to achieve, yet not so completely difficult that agents give up! The best schemes allow agents to not only hit targets – but drive straight through them and keep going.
At the basic level, there are a number of ways to structure a commission scheme:
- By percentage: Decide exactly what level of conversion you require, anything over this level is what’s available to pay as commission to your sales agents. For example, if you break even at 10 sales, then a tiered strategy of offering 5% on all sales up to 10, then 10% for 20, 15% for 30 etc etc might be appropriate.
- Money earned: For every £250 worth of new business, agents receive 1.5% of the amount.
- Fixed targets: A set target with a set amount of cash for hitting that figure.
- Team targets: Encourage agents by setting group targets.
Commission always works well to incentivise your agents to sell; however, the main issue is that money can alter behaviour – making staff focus on the wrong things in search for that bumper payday.
One great example of commission rates creating negative behaviour, is the used to static sales targets. Such a target can create negative behaviour in your sales staff:
- Good performers, might hit their monthly target early on – before coasting through the remaining days. This means that high performing agents may slack off, ensuring your sales rates lower as time wears on.
- Some staff, may discover “work arounds” to achieve the sales rate early – leading to clawbacks and refunds/cancellations.
- Good staff, might find the target too difficult to reach – leading to decent sales staff moving on to easier pastures.
In all these case, you might be better moving to a structure where you pay incrementally. For example, if you break even at 10 sales, then a tiered strategy of offering 5% on all sales up to 10, then 10% for 20, 15% for 30 etc etc:
- Good performers will keep hitting targets throughout the month – maintaining a healthy sales board for the entire month.
- Good staff will still hit some targets, helping them to feel better about improving their technique.
In all cases, it’s extremely important that you tie commission payments into the quality of sales produced, not just the volume. If an agent have a higher level of cancellation or clawback – they can have commission payments reduced to match. With a good quality and compliance agenda, you can ensure that quality is always on your agents minds. This has the added bonus of weeding out staff who discover those “workarounds” to achieve targets easily.
By focusing on quality plus quantity, you can ensure that your sales agents not only deliver on revenue – but that the revenue will stick.
Example sales commission structure
An example of a good sales commission structure would be as follows:
- Any sales achieved over 10 daily will generate £2 in commission for each sale above 10
- If the team generates 50 sales then the agent gets an extra £0.50 per sale
- A minimum of 90% or above compliance/quality for each sale generated
- No higher than 5% cancellation rate
This commission structure allows your agents to hit targets and keep improving, whilst ensuring that only quality sales are generated too.