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More and more, we see that base salaries of sales representatives are supplemented with a bonus program rather than commissions. This has been confirmed by several surveys, including our own.
Problems with commissions
Commissions were appropriate several decades ago. At that time, businesses, products, clients or customers were relatively stable. Today, changes are multiple, complex and frequent. The sales compensation plan must adapt to these changes in order to support the organization’s success.
Commissions may also be a nuisance. Changes may be difficult to make: territory structure, commission levels etc.
Bonuses, an effective approach
Trends towards bonus programs for sales representatives is explained by their flexibility. A bonus program allows organizations to align sales reward with their marketing and sales strategies. It can be a very effective management tool.
In a organizations that still use it, it would be advantageous to reduce the relative importance of commissions in the pay package, if not eliminate it altogether. A sales compensation plan which is aligned with the organization’s objectives enhances the likeliness of their achievement. |
