Commissions: a Break on the Motivation of your Salespeople:- In his “Manifesto for a Reversal “the American journalist Daniel Pink proposes to question the sacrosanct system of remuneration to the commission of commercial teams. Like him, we need to question established patterns, revisit codes and think outside the box to find new ways to increase our productivity and sales. Using best practices and an original idea, we suggest you to find out what really motivates your sales people.
Increase Sales by Removing Commissions
Take the example of Red gate Software, a software company for programmers, founded in 1999 by Neil Davidson and Simon Galbraith. The sales department initially pays its teams with a system of direct commissions, which ends up becoming more complex so that it takes precedence over the main objective: software publishing and sales.
In short, salespeople lose valuable time calculating the best return for them, which negatively impacts the overall productivity of the company. Davidson writes on his blog: “That’s what our clearing system looked like – a gigantic medieval and complicated labyrinth, based on an erroneous postulate.”
A false assumption: commission compensation?
Without Commissions, What Motivation?
Davidson then decides to develop another system: he approaches his sales forces with the idea of paying them a fixed salary plus an incentive bonus on the result.
When he talks with his sales people, Tom answers, “It’s a good idea! But James will never agree he is only motivated by money. Remove the commission and it will leave. “
When he speaks with James, it says: “Good idea! But it will not please Tom, his only motivation is money. “
Would this system of compensation push salespeople to think that only money motivates them?
Is money the main motivator of sales forces? To these questions, more and more respond that no; others, such as the founder of Red gate, are developing new incentives.
Supported by his sales teams, Davidson then redesigned the compensation system. With the removal of commissions, Red gate Software’s total sales increase – only two out of 150 sellers leave the company because uncomfortable with the idea of this new system.
Another company, System Source, also decides to apply a fee-for-service system and its founder, Weinstein, notes the benefits: “Inherently, individual commissions discourage teamwork. Why help “Mary” sign a customer when it is she alone who will reap the benefits of the sale? The salary at the commission divides the salesmen.
In fact, this is one of the possibilities open to the abolition of commissions: teamwork and collaboration to achieve a common goal. In this way, by promoting teamwork, you can improve the motivation of your salespeople.
The disadvantages of an overly Complex System of Commissions:
These elements, combining team spirit and motivation, make it possible to refocus sales on its primary function: to meet a customer’s need not just to earn a commission. Indeed, if the commission remuneration system has certain advantages, a system that is too complex, with personalized bonuses, commissions, commissions per period, etc., is easily “returned” to Can take advantage of numerous loopholes to achieve their goals (especially by playing on the timing of sales).
It is also a system that can be unequal in nature. Indeed, some salespeople are favored by their sales sector, where others are not. However, attempting to regulate these inequalities by creating, for example, a personalized remuneration system can lead to the opposite result. However, this strategy is not without logic: since each salesperson does not have the same motivating leverage, an individual system may appear engaging.
However, in practice, the greater the sales force, the more difficult, time-consuming and expensive it is to set up such a system. Moreover, once completed, even greater deviations may result. A system of commission remuneration can then raise questions and complaints from employees, at the risk of slowing the productivity and overall performance of the organization.
The Benefits of Removing Commissions:
These are the two main points to remember:
- The system of commissions does not necessarily constitute the best motivation for the sales force. Consider privileging other motivational levers for better performance.
- A commission-free compensation system allows your sales team to collaborate, and therefore to be more efficient. Moreover, it allows to build a team spirit which, well maintained, constitutes the best motivation possible.
So, should each company eliminate commissions? No, of course. On the other hand, if your company knows:
- Difficulties in managing the rivalry of its teams,
- A system of remuneration that poses more problems than it solves,
- A cruel lack of motivation on the part of some commercial,
Why not try a new system? The regular organization of innovative business challenges can effectively replace the commission. Original rewards and prizes also allow for better results, with higher motivation. So if you’re looking to improve the motivation of your sales people without revolutionizing your entire pay system, its possible! You can imagine innovative, collective business challenges that value teamwork more than individual performance.
To do this, you can use a digital platform and ergonomic management and commercial animation such as Incentive. Be a leader, be visionary.
Hello everyone! This is Richard Daniels, a full-time passionate researcher & blogger. He holds a Ph.D. degree in Economics. He loves to write about economics, e-commerce, and business-related topics for students to assist them in their studies. That's the sole purpose of Business Study Notes.
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