The compensation of a sales team generally consists of a fixed salary, to which a variable component is added. However, this variable compensation can take various forms: performance-based bonuses, ranking bonuses, commissions… Each sales organization must define a compensation policy adapted to its activity, market, and performance.
In an increasingly digitalized context, your sales team’s variable compensation system must also adapt to their new working methods. So, how can you create an effective and unifying variable compensation system for your sales force?
Variable Compensation: Bonuses or Commissions?
When you create a variable compensation system, the first choice available to you can be summarized in 3 words: bonuses or commissions? According to the variable compensation barometer published by People Base CBM, performance-based bonuses remain a priority (75% of the variable compensation share), well ahead of commissions (12%).
But in reality, this is not always a choice: it is entirely possible to integrate bonuses, incentives, and commissions into your new compensation system. However, the choice must be made based on the needs of your sales team and the objectives of your organization.
Bonuses can thus prove useful for achieving specific, quantifiable results. Ideal for rewarding individual performance, a bonus system can adapt to the specific tasks and skills of each of your employees.
Commissions and bonuses, on the other hand, will be more suited to the ongoing tasks of your sales team: they allow for the establishment of a progressive reward system, individual or collective.
In both cases, the chosen type of variable compensation must also take into account the current state of the market in which you operate. Periods of recession or growth, the arrival of a new competitor in the market, or the overall evolution of your sector of activity should thus lead you to rethink your compensation strategy.
The Future of Sales in the Digital Age, download the guide here
Consistency and Equity: The Key Words for Your New Variable Compensation System
The creation of a variable compensation system must meet several objectives, both different and complementary:
- Improve your company’s sales performance;
- Encourage your sales team to take initiative;
- Promote motivation, engagement, and retention of your sales force.
However, simply implementing a bonus or commission system is not enough to achieve these objectives. Your variable compensation system must gain the buy-in of your sales team to be effective. To be effective, your new system must therefore be consistent with the company’s objectives and situation: the proposed bonuses and/or commissions must be realistic, as must the objectives that trigger their payment.
Furthermore, it is essential that your sales team perceives your variable compensation system as fair for them to fully commit. Do not hesitate to personalize the objectives of each of your employees, based on their specific tasks and missions within the organization.
What if you finally transformed your variable compensation system into a true lever for performance, motivation, and engagement within your sales force?
The Future of Sales in the Digital Age, download the guide here