The sales motivation scheme is one of the most powerful tools sales managers have at their disposal. The motivation scheme has a direct effect on team motivation, and therefore on whether they reach their targets.
A sales scheme doesn’t function alone. A firm also needs:
- Effective sales procedures and tools
- A good product
- A receptive market for the product
- An competitive offering
However, if all of these things are in place, then the sales scheme can help a business fly – or plummet. Whether a firm is a matured sales firm or a small start-up, the sales scheme can help an organization’s revenue exceed expectations.
A motivation scheme does not mean making one simple decision on how much the system should pay, or whether to cap potential earnings. There are many variables that need to be clarified. One of the most important variables is sales crediting. In this article we’ll look at the complex story of sales crediting, and how to make the correct decision on who gets the credit.
Why Sales Crediting Isn’t As Straightforward As It Seems
Many people make the mistake of thinking sales crediting is straightforward: If someone makes a sale, they get compensated for it.
It isn’t that easy, though. For example, should the sales credit go to:
- The person who closed the deal?
- The team who worked together on that deal?
Deciding how to allocate sales commissions is one of the biggest decisions an organization must make when designing a sales scheme. In many cases, there is more than one employee involved in closing a sales opportunity.
The Complexity Of Selling To A Global Market
Sometimes closing a sale involves multiple team members across a range of departments. This is especially true when selling to a strategic or a global account.
When an organization has a global reach with sales teams allocated to various locations, it’s not uncommon for the regional sales team and the global account managers to work together during the sales process.
The Complexity Of Selling Packaged Solutions
Many of my clients sell complex packaged solutions to their clients. In those cases, there is often an army of supportive functions that help the sales person close the deal. For example:
- Inside sales teams
- Marketing teams who find and qualify leads
- Pre-sales people and sales specialists who provide technical knowledge and expertise
Depending on the company, a sales person might be responsible for the entire sales cycle, including finding leads, or they might only come on board once other people have found and qualified the leads.
In cases where there are multiple people involved, there arises the question of how to credit a successful sale? Managers must ask:
- How will the sale be credited?
- Who carries the quota?
- Who is responsible for leading the sales effort to seal the deal
- Who is recognized as landing the sale?
- Who will get paid commissions?
These questions are not easy to answer.
The Most Important Factor When Deciding How To Allocate Sales Credit
In a moment we will look at how to make the decision, and at some practical examples. However, there is one key factor that sales managers must always keep in mind:
All team members involved in the selling process need recognition in order to stay motivated.
Team members need to feel that they are a valued part of the team. For example, if an inside sales team qualified the client, then they brought an opportunity that the main sales team wouldn’t have had otherwise. Or if a specialist carried out a perfect demo that swayed the client’s decision, then they played a vital role in landing the sale.
If those team members are then overlooked when it comes time for compensation, they won’t be so motivated to help drive the sale in future.
Other factors that companies must take into account when allocating sales credit include:
- Who owns the opportunity?
- How many team members put effort into the process of closing the sale?
- What is the relationship between the staff and the main stakeholds?
- Where was the contract signed?
- Whose budget supported the opportunity?
- Which team member has the traditional account relationship with the client?
Taking A Closer Look At The Opportunity Life Cycle
Let’s take a practical look at the opportunity life cycle, to illustrate how a company might allocate commission.
The opportunity life cycle begins with an inside sales person who makes a few cold calls and finds an opportunity with a new client, who has no existing relationship with the company. Once they have qualified the lead, they pass it to the sales manager, who is responsible for engaging the client, presenting the value proposition, and closing the deal.
Perhaps the sales manager also brings in a sales specialist from the relevant product team to help them secure the deal. This sales specialist doesn’t carry a quota, but there can be no doubt that they helped land the sale.
Now imagine there is also a strategic account manager involved. They have the overall responsibility of managing the account, but they also allow other sales people who sell different products to step in. Now the sales manager, the account manager, and the sales specialist are all working together to support the process.
In rarer cases there may also be external channels involved in the sales process. For example, there might be a redistributor who is responsible for getting certain products in front of the end consumer. They might not share commission with the sales person, but their profit still affects the overall margin of the product.
Having Rules In Place Is Essential
As we have seen, there are many factors to consider when deciding which rules to apply to sales crediting. One thing that is for certain is that the sales management team must decide on the rules, and communicate them clearly to everyone involved.
Sales motivation scheme procedures must include the rules of assigning credit and paying commissions in all likely scenarios. In some cases, different rules will apply to different situations. For example, in some cases it will be better to split a single commission between several people, where in other cases it will make more sense to pay additional commission to each person who was involved.
For sales people, understanding their commission opportunities is the most vital element of their job. Management must communicate clearly the financial outcome of any sales opportunity they are working on, including whether they will receive additional commission or share a split commission.
Two Possible Scenarios
Let’s take a look at two different possible scenarios, and how managers might credit commission in each of them.
Scenario one. An IT company that sells multi million dollar solutions has a sales opportunity. There is a strategic account manager who is in charge of customer relationships, a sales person who is dedicated to the specific product that is being offered, and a technical specialist.
The strategic account manager found the opportunity, and is in charge of commercial negotiation. However, they need the active involvement of the sales person to secure the deal. The sales person needs support from the technical specialist to demonstrate the product to the client.
The strategic account manager found the opportunity, influenced the client, and put together the terms to close the deal. However, the product sales person drove around 50% of the opportunity, because he was responsible for providing information and further building the case. He could not have built his case without the demonstration from the technical specialist.
In this case it is clear that all three people need to be rewarded. If the overall incentive for the deal is $10K, we could pay double commission and pay both the strategic and product sales people $10K each. Both could give up 10% of their commission to the technical specialist, to reflect his part in winning the opportunity.
Another way to approach this might be to give 30% of the overall commission to the strategic manager in recognition of his strong customer relations, 10% to the technical specialist, and the rest to the product sales person because they put in the most amount of one-to-one client time and work.
Scenario two. A sales person is working on an opportunity that came from an inbound call as the result of a strong marketing campaign. In this scenario there is a pre-sales team member who is heavily involved. The sales person talks about the added value of the product, but the pre-sales person has actually shown the value in practical terms, and that is why the sales person got the inbound call.
Unless the pre-sales team member is under a commission scheme of their own, they need to get some credit for their contribution. In this case, the most practical solution is to have two distinctive commission plans in place, with the incentive opportunity for both people being 1.5 times the incentives opportunity of the deal.
Management should always remember that anyone who works on an opportunity, either directly by talking to the client, or indirectly by providing information to the sales person, needs something to keep them motivated.We are seeing a shift to more companies offering packaged solutions rather than single product sales. Team work is becoming more vital as a result of these packaged sales, and it is important that no team member is ignored when it comes time to reward efforts. Careful consideration of the mechanics of crediting complex sales is essential, and should be done sooner rather than later. When team members know they will be rewarded for their part in sales, even if they did not directly land the deal, they will be more motivated to put in their best effort and bring bigger revenues for the company.