The elements of commission plans include the goals, measurements, timing and rewards. The combinations are almost infinite but patterns may be found in some industries. At the core of any incentive plan is determining what role commissions play in the overall sales compensation package.
Four of the most common commission structures are:
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Commission only;
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Commission plus salary;
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Commission plus bonus; or
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Commission plus salary, plus bonus.
Although industry standards carry significant weight when creating a commission structure, ultimately your budget and priorities will determine how you pay sales professionals.
Here are a few things to consider:
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Goals should tie directly to the business plan and consider both sales volume and profitability.
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Measurement should be clear and unambiguous.
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Timing should be near enough term (usually less than a year and sometimes immediate) so it is motivating.
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Reward percentages or sums should be fair and consistent with the industry.
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Adjust the compensation to match changing goals but be careful not to confuse or demoralize the commission staff.
Ultimately, your plan should keep your salespeople happy while supporting and advancing company goals.
