4 Reasons Why Sales Commissions Are Still Essential
Wondering whether to do away with commissions and pay all your sales employees equally? What’s your excuse? That the economy is rough and selling goods isn’t as easy, or salespeople know that sales won’t come easy and may not want to sign contracts where their salary isn’t guaranteed? If this sounds like your argument, hang on as I tell you why commissions still work even in the most uncertain business environments.
1. Incentives Motivate Workers and Motivation Fuels Results
Companies expect employees to always put the business’s wellbeing before their personal interests. While this can be doable sometimes, it’s not realistic to imagine that workers will feel motivated to do so always. It’s human nature to feel demoralized at times and when this happens, something has to be done to lift their spirits.
Sales and marketing is a challenging job where employees deal with rejection, indifference to the product, and high competition. But, the business expects them to keep going back to the field or continue making call after call even when they are not confident how the client may receive them. This can weigh someone down. But, you need the sales coming in if the business is going to thrive. In other words, you can’t allow them to give up!
Sales commission plans come in handy to motivate sales reps to stay focused on the end prize. So, other than opting for an equal pay, businesses should structure their payment plans to include well-spelled out incentives and rewards for those meeting specified goals. Such a plan is what every business requires to bring out the best sales talent and reap optimum results even when the field is shaky.
2. There’s Great Gain in Measuring and Acknowledging Performance
According to a 2016 Globoforce Employee Recognition survey, 90% of workers feel that value-based, peer-to-peer acknowledgment causes them to be more contented with their work. And going by the findings of Bersin by Deloitte, businesses that spend a part of their payroll on employee recognition noticed 14% positive changes on engagement, customer service, and productivity.
Since employee engagement boosts performance, it could be the difference between a winning and a losing business in any field. The question every organization should ask is; how will we recognize good performance by our employees if we have no means of measuring individual contribution?
A solid compensation plan shouldn’t just look at the systems or the output of the team. Instead, it should also focus on the human aspect of the sales team and seek to influence the best individual behavior. There’s a salesperson whose strength is in servicing existing accounts, another who hunts and closes deals, and the one who does all – how can your commission plan get the best out of each?
3. Incentives Have Long and Short-term Benefits
It’s possible for a business to feel reluctant about paying incentives thinking that they will make salespeople focus on short-term gains. This is actually not likely to happen especially if the commission strategy involves measuring and rewarding based on different metrics such as the sales person’s entry to new markets, retention of customers, and others. Such a model encourages sales reps to build relationships and will result in both short and long-term results.
4. Commissions Create an Atmosphere of Healthy Competition, which Optimizes Team’s Performance
There’s this assumption that sales incentives and contests can result in some sort of rivalry among employees. Others will argue that it is one cause for employees working in silos. Basically, healthy competition is a necessity in any organization that wants to optimize the performance of its sales team. It actually bears healthy results. So, what threatens the company’s culture?
What any business needs to encourage healthy competition without risking the business culture is to set a strong foundation of working towards common goals. In such a company, individual sales goals are defined in a way that they clearly contribute to departmental and, consequently, the business’s overall goals.
If you view sales teams paid under commissions as hungry humans only racing to make an end, then you’ll have challenges trusting that they can make the best decisions for your business and the customers. But even without commissions, there’s always going to be a conflict about what’s good for the customer, business, and the salesperson. In a nutshell, everyone is negotiating for a better deal – that’s normal in business!
Why not embrace the conflict and weave it strategically in your compensation plan? A well-designed commission structure will inspire exceptional performance, encourage the right behavior and see you attain the company’s goals without undermining healthy competition.
Important Note: We will have a webinar next month, focusing on “Preparing for a New Compensation Plan”. Check back on this article next week for more details.