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Rewarding Sales Reps through a Commission Plan: When is it the Right Plan to Use?

Recently, we participated in a sales compensation planning discussion with the newly appointed North American business President for a global specialty chemicals company.  Having come from another industry where sales commission plans are the prevalent variable compensation scheme used to pay the sales force, he asked:  “Why aren’t we using commission plans to pay our sales forces?  Wouldn’t we be more likely to achieve our business plans if our sales people had a stake in the sales they made?”  Those questions suggested to us that this executive believed a sales commission plan is more likely to contribute to business success than other approaches (e.g., a sales bonus plan based on a rate per point payout line).

The subsequent discussion of those questions by this business’ North American leadership team proved to be a valuable learning experience.  Essentially, it resulted in a shared understanding about how to decide when a sales commission plan is right for a particular business situation.  For an abbreviated presentation about how we suggest companies’ management teams think about this topic, see our slide presentation at:  http://tinyurl.com/knso99j.