Creating a Sales Compensation program

My biggest frustration with retail these says is the move away from a commission oriented sales structure.    Big box retail (Circuity City, CompUSA, Best Buy)  have moved to an hourly based commission and in very few cases providing small spiffs as incentive to sell specific products.    Best Buy was never commission and made it a point to stress that to each and every customer that shopped there.

What is wrong with a commission based sales person?   In my experience, commission based sales staff contribute more than the average hourly based sales person.    They have more incentive to increase the average order and to make sure the customer purchases today. 

I managed many sales people in my career and always found that sales people on a commission structure always performed at a higher level than those on an hourly basis.   While I did find some great hourly employees, most of them eventually left for higher paying positions.  A commission based compensation structure provided a built in motivation system for my teams.   Do better at your job and see immediately rewards.    

Here is commission based is better than hourly based:

• Less turnover.  Fewer employees leaving for better pay due to the fact their pay is limitless
• Easier performance management.    It is easier to manage someone to higher performance when you can immediately point to an increase or decrease in their paycheck.   
• Better results in Average Sales Value, Items per ticket and Close rate.  A commission sales person realizes that the quality of the sale results in a higher income for less effort.

For those of you looking to create a commission based compensation plan, I found a great link here.    Leon Frank discusses how to create a compensation program that really motivates your sales force.   He brings up some great points including:

• Making it clear and easy to understand so that it truly motivates, not confuses your staff.
• Making income unlimited.   
• Consistency in the compensation plan so that no one is treated more favorably and you create moral issue which will lower sales performance

If you are not currently offering a commission or bonus structure to your sales staff, I would suggest researching how you might be able to implement with your employees.  Mr. Franks article provides a great first step but don't be afraid to search for help in creating your program.  No compensation/bonus program is better than a poorly managed one.     I am currently experiencing that problem in my current job and I can tell you it is a painful situation.    The worst thing you can do to an employee is screw up their paycheck.   And there is no better way of screwing up someones paycheck than rolling out a poorly planned compensation plans.

Anybody have any other input on how to create a great compensation program?

Comments

[Paul Brown]

Sales Managers have a wide variety of responsibilities in today's competitive landscape that they are faced with. This certainly makes finding the time for sales management and sales planning a challenge. In sales management we know the importance of executing sales with a sales plan. To ensure the passing of this skill to sales reps, we need to teach them to create a successful sales plan and execution strategy. Since time is limited, using sales templates and tools will help to maximize the interaction with Sales Reps to get the most measurable performance gains for the time spent.