Deciding who gets paid for closing a sale is surprisingly difficult. I’ve seen it time and time again in the sales environments I’ve worked in. One person helps close a deal, but because it wasn’t “their” sale they get no credit or commission, and before long they’re disgruntled enough to leave the company.
Deciding who from among the sales team is eligible for sales credit is a complex but vital part of sales incentive design. If your team members don’t feel they’re being fairly compensated for their involvement, resentment will build and performances will drop.
Who Made The Sale? It Might Not Be As Straightforward As You Think
Anyone who hasn’t worked in a sales environment thinks it’s straightforward: You make the sale, you get paid commission. Of course those of us who work in sales know it’s not quite that easy.
While it’s true that each sales department has a team with quotas and targets to work to, that’s not the whole story. They say it takes a village to raise a child. Well, sometimes it takes a team to make a sale.
A successful deal might be the result of 3 – 4 people’s efforts. Say for example one of your sales people identifies a fantastic opportunity with a new client. What happens when the new target needs some help with the technical side of setting up your product? Your technical experts get involved and drive the opportunity to the next level.
So who should get paid? The sale wouldn’t have happened if the first team member hadn’t sniffed out the opportunity, but it’s quite possible that the deal would never have been closed if the tech expert hadn’t stepped in to handle the prospect’s questions.
Another common example is when a global company has an account manager who closes a deal which was found for them by a local sales person. Who should get credit – the local person who found a nearby opportunity, or the manager who closed the deal?
There are many such examples in any company where more than one person is involved in a sale. The question for team manages is how to allocate credit.
The Risks Of Not Allocating Credit Fairly
As we’ve already seen, there are some very real risks associated with not allocating credit fairly:
- High turnover due to staff getting frustrated at the unfair credit allocations and leaving for a job where they feel they’ll be more appreciated.
- Sales support people not being cooperative because they know they won’t receive any recognition or compensation for their role in closing the deal.
- A drop in performance as the sales team gets fed up of the unfair credit system and no longer wants to put in as much effort.
- Tension between teams and a lack of teamwork as salespeople see that if they help someone else close a deal, that person will get all the credit and the one who helped will be left with nothing.
Companies who want to build a loyal sales team that meets and exceeds targets need to examine this element of the sales incentive scheme carefully. Your people deserve to be fairly compensated for the work they do in closing a sale. Design your scheme to make sure they are, and they’ll work harder and perform better for your company.
Sales Team Managers Have Two Choices
There are two ways you can share commission among all the team members who helped close a deal.
- Split the total commission for the sale into parts and portion it out among the team.
- Have a separate incentive scheme in place for each team member (this costs more in the long run).
Getting your sales credit sharing scheme straightened out is vital. Your staff need to know they will be compensated for their efforts, and how much. Your financial team needs to know how sales crediting works so they can accurately forecast the incentives cost and budget for each year. And your management team needs to know how much incentives cost so they can take the costs into account for each individual deal.
How To Decide Who To Pay and How Much To Pay Them
Deciding who to pay for a sale can be complex. I recommend asking the following questions to help you decide whether a team member should be included in your incentive scheme:
- Did the person help drive the opportunity to the next level?
- Did their expertise or knowledge directly contribute to the closing of the deal?
- Did they have a direct relationship with the client’s stakeholders, and did they communicate information with the stakeholders in a way that helped close the deal?
- Was their overall involvement directly related to the positive outcome?
The other decision is, of course, how much to pay for incentives. I recommend managers make a decision on how much compensation the company is willing to pay to the sales team per sales deal. In some cases this will be a straightforward percentage of the revenue that is passed on to the sales force. In the case of some products, the question might be how much of the profit margin to pay back to the sales people.
Starting with this final figure stops incentives spiraling out of control and ensures a company can stick firmly to their budget.
You also need to decide whether to set up the sales incentive scheme so that each person involved in the deal gets a full credit amount, or whether you are going to split the credit between team members. This is a subtle but important difference.
If there is considerable effort by all the members who were involved, then each person deserves full compensation.
On the other hand, if the effort was very much divided between the different people involved so that no one person was putting in full-time effort, then it is better to split one incentive between the different team members.
What works best is a question only you can answer. Each company, each sales force, is different and has its own needs. However, there is one thing that each company has in common: Success rests on making sure sales people feel fairly compensated thanks to a well designed and clearly set out incentive scheme.