5 simple tips to get your commission scheme right
5 simple tips to get the commission scheme for your telesales or telemarketing team right.
Commission schemes, bonuses and campaigns are an important element in the management and reward of good sales people and the team itself. Many good organisations do this because they know that to recruit and keep the best quality staff, they will have to offer good rewards for the top performers. Money certainly isn’t everything, and it will motivate some people more than others, but it is important. When the power of persuasion, and force of personality and motivation will frequently be the skills that win orders and business from less effective competitors of yours – you want to ensure you’re ahead of the game.
Having said all of that a commission scheme or bonus scheme has to be coherent and logical to be effective. At worst a badly structured commission or bonus scheme can be demotivating. Completely contrary to the intention – so an utter waste of time. Take for instance the commission scheme that rewards individuals for selling more. But which rewards for achievement well above what anyone ever achieves. Imagine the detrimental impact of a scheme which shows you “what you could’ve had.”
These following 5 points are necessary to ensure the scheme works well.
1. Ensure your scheme fits the overall goals of the organisation
You don’t want to reward people more for doing the same as before, and you don’t want to reward them for behaviour or achievements which are different to the company or organisation’s goals. The commission scheme should be in line with company goals. If the members of the team earn lots of commission, this should mean their manager, director and ultimately the company is achieving it’s goals.
2. Your scheme must be clear (with calculations made in real time)
Too many schemes are complicated, and involve complicated ratios and even worse are based on things (such as profit) that the front line team member does not (or is not allowed to) get sight of. If a scheme is to be effective, it must allow someone to make decisions while on the phone, knowing what it will earn them. For instance a 1% of sales value as commission is fine. In other words if I can use my persuasive powers with this customer on the phone now to land this £5,000 deal, I know I’ll earn £50 from it. “Furthermore, if I could upsell and get the order up to £6,000, I’ll earn myself £60.” In this way, it can motivate someone on the phone. And chances are they’ve already spent it in their head by the time they put the phone down. If this gets them what they want in life, that’s fine and dandy.
3. Understand the difference between commission, bonuses and campaigns
Commission is a form of additional payment that is constant (until it is periodically reviewed.) It always pays the same for the same behaviour or outcome. That way people know where they stand and can plan ahead. “Ok, so if I can sell £300,000 over the next 12 months, at 1%, I can earn myself an extra £3,000 – which we can use towards the deposit on our first home.” This is where commission works well. Commission should be linked to individual performance.
Bonuses and campaigns by contrast can be used to encourage team performance and short-term goals. By all means pay each member of your team a set bonus if they achieve their combined team target this quarter. And by all means run campaigns to promote new product lines, or sell old ones to clear stock lines. Make sure they’re time bound though – always. It keeps the focus and maintains momentum.
4. Remember that people think in 3s
To avoid your commission scheme getting overcomplicated, remember that we think in 3s. So wherever possible keep your commission scheme to 3 component elements. This may be a % of each sale, plus perhaps an additional element for opening a new account, with potentially a different and higher percentage once you go over target.
5. Review your scheme periodically
While you don’t want to be changing your scheme frequently, you will at least want to review what is happening once a quarter or so. Remember that people (and that includes you and me) will always find the loopholes and the path of least resistance. Review your sales figures. Have a look at what each person is selling. What direction are sales going in? What is the product mix? Are you getting new accounts opened? What is happening to sales activity? Is it going up? And of course the bit your colleagues in finance want you to be aware of is – how much is it costing you as a company?
As I wrote earlier, running a scheme that simply pays out more for the same sales performance is clearly not an effective scheme.
To Market regularly advises client companies about how to set up, or get more from their commission and bonus schemes. We help design and implement them, or we’ll help you review the ones you already have. This is just one element of helping you getting the most out of your telephone based telephone sales or telemarketing team. To Market runs training and development programmes across the Midlands including Birmingham, Coventry, Nottingham, Derby, Leicester, Northampton, Milton Keynes, Bedford, Stratford, Warwick, Leamington Spa, Solihull, Lichfield, Rugby, Lutterworth as well as wider parts of the East and West Midlands. For more information about how to get more from your team contact us on 01858 461148 or e-mail email@example.com
originally posted 31st May 2013