Top Ten Commission Plan Criteria
By Janet DeGeorge
1. Simple to understand: of course this has to be number one.
If a sales rep doesn't know what they have to do by the day, even by the hour, to reach goals and make the most money possible, then it's a bad plan. If you use confusing point systems, a communal "bucket" system that basically pits reps against each other, or your commission plan criteria is more than one page long, you are not making it as simple as it needs to be. A plan that is not fully understood by all does nothing to motivate reps to excel. In my training I have found only 2 in 10 fully understand their commission plan. To make certain they understand, have the rep that GETS IT (that 2 out of 10) explain it to each rep in a meeting or one on one from THEIR point of view without managers in the room. Reps simply do not like to appear dumb in front of their manager.
2. Market Driven:
This is where I see a lot of commission plans go wrong. Big money or spiffs are put on what the newspaper wants to sell instead of what the market needs to buy. While this takes some research, basically you want to stay away from spiffing Employment specials in December (i.e. don't try to sell snow shoes in the summer). Another example I can give you, a newspaper was once completely disappointed in their employment special for the Hospitality industry and that none of the reps met their goal for this section. Why did it fail? The special was in January...exactly when that industry is LAYING OFF their former holiday help! No one needed to hire!
3. Easily Trackable for managers and reps:
Don't set goals you cannot measure weekly from your front end system. Don't set goals that your billing system cannot confirm at the end of the month. It is far better to say, $1 for every 14x ad you sell, then to say, if you reach 35% of all ads sold 14x, you get 5% of the revenue. In the first scenario, the rep hears "ching ching" every time they sell a 14x ad. Plus it's an easy system to measure in your front-end system and you can send out updates each week to keep reps motivated. The second scenario, what I call the "hope for the best" spiff, reps could never know their percentage until everything is calculated, and that adds work and confusion to what could have been an easy spiff for frequency.
4. Attainable by 80-90% of the reps:
Of course you all have heard that a commission plan that is not attainable is a failure. Every aspect of the plan should be achievable most of the time. If 80% of your reps are achieving every aspect of the goal 80% of the time, you have a winner. The 20% of the goals, or goals that are hardly ever achieved, should be scrapped or rewritten. If you have a target for a rep to sell 20 contracts a month, and even your top performers are only selling 5 a month, you've got a problem.
5. Target key sales initiatives:
So many plans, especially in outside sales, fail to target separate spiffs for kick offs or something special going on. Instead they let it "drop to the bottom line". I have trained enough outside sales reps who tell me face to face that they sell what will be best for the customer and what will best help them reach their revenue goals. When you have key sales initiatives, you have to spiff them separate and STILL let them hit the bottom line. This is not "double dipping". Mathematically, you are just giving a higher commission to that initiative. And that is what you want to do. Never have a contest on these initiatives. Your overachievers will always win it; the rest of the staff knows that and won't even try. Give everyone a reasonable goal, and a spiff for personally going over that goal.
6. Flexible to changes: Many commission plans I see say at the bottom things like "management has the right to change this plan at any time".
Ha, that would really make me not want to buy into it, knowing that I am setting my customers up to buy a certain way and not knowing it that goal or spiff will be in effect the following month when that revenue will hit! Instead, state a time reference. These goals will be in effect for the following 3 or 6 months. And if you are planning on changing it, tell the reps the changes at least by month 5. If you are not changing it, also tell the reps by month 5. Analyze your commission plan every quarter to see what is motivating reps and what is not and get their feedback consistently on the plan.
7. Built-in Specials for end of quarter boost:
Almost all newspapers have quarterly goals. How do you get your reps to really push on that last month? You build it into the commission system. Every March, June, Sept. and December there should be built in spiffs that can give your reps more commissions then in the other months. You should also have a scenario whereby they can "make up" for goals they missed the first two months. At one of my newspapers, the reps made a flat percent of revenue on sales, and in the last month of the quarter, that percentage was doubled (and that was worked out ahead of time in the commission budget). This may not be a good plan for many newspapers, but having more commission available in the third month of the quarter is just a basic good idea if you and your newspaper are on quarterly goals.
8. Uncapped in as many areas as possible:
In our sales force we have overachievers, our normal reps, and then always a few underperformers. (If you had all overachievers they would all kill each other). So a blend is normal. We want to make sure our overachievers NEVER STOP selling and that will happen when we have not only uncapped goals, but extra spiffs over goal. Try this on a special and see how those overachievers never stop selling!
9. Drives New, Additional or at least, maintains revenue.
Can you know without a doubt that your goals, each one of them, will actually have a positive effect on revenue? I can't tell you how many times I have seen a 2x pick up goal that actually SOLD AGAINST a more lucrative 7x order because the SPIFF was on the 2x pick up. Be very careful when setting commission goals that one does not have a negative effect on your revenue or would in fact, produce less results for the customer.
A good commission plan never compromises a sales rep's or a newspaper's integrity by pushing products that does not benefit the customer. You may think you are pulling the wool over the customer's eyes in the short run in your need for extra revenue, but this soon causes distrust between the customer and the newspaper and that customer starts looking elsewhere. This could be a scenario that causes customers to drop their subscription or go to places like Craigslist. Make certain any of your "assumptive" sales are clearly explained to customers. Look over what you spiff now and make certain every aspect of that extra charge works towards getting that customer better results. Monitor your reps so you know they are not hiding charges within the "assumptive sale" just to make goals. No you say?? In monitoring reps I have only heard 2 in 10 let the customer know that the price also included their ad on the Internet.