Stop Wasting Commissions on the Wrong People

Carrie Ward

Any good sports manager knows his players. He knows when to pull in the right person for the right situation. If it’s the bottom of the ninth, the team’s down by one and the slow catcher gets on first, the manager will put in a pinch runner. It’s not an insult to the catcher, who got the scoring run in position. It’s a strategy to score a run.

Or consider Jacob deGrom, who can take the mound and pitch a no-hit game. But if my beloved Mets don’t provide any run support, he won’t get the win. That’s why everyone on the team brings home a paycheck, regardless of how well he pitches.

The same applies to sales. Sales managers need to know how to draw upon a broad range of expertise to provide an integrated solution for the customer. And, because consensus buying impacts almost every sale, managers have to equip reps to align a diverse set of influencers that goes beyond a single economic buyer.

It’s a team effort to get the “W.” But should everyone on the team receive credit?

More people, more dollars

A couple of years ago, a client asked us to review their crediting process. We came across a deal that had 41 people credited for one sale.

41. As in Tom Seaver.

And no, this was not some global, record-setting deal for a trillion-dollar, multi-national company. Our client was a $4 billion software company with operations primarily in Europe and the US. Not only was this deal expensive, it also took hundreds of hours to solve this crazy crediting puzzle.

Upon deeper analysis, we uncovered 20 account managers who received full credit for the deal. We also found dozens of managers, inside sales, industry/product specialists, solution architects, professional services, customer success, and sales operations people. Even a person who had retired from the company two years prior received credit for this sale. When we asked why, sales leaders answered, “It was a team sale.”

But as we probed further, the insane number of credits was a result of leadership trying to keep everyone happy during a merger, poor quota setting, and a lack of crediting structure. It was not because all 41 (41!) people had direct influence on that sale.

When it comes to sales crediting, there are two options: make the pie larger or cut the piece apart.

Option 1: Make the pie larger through multi-crediting (also known as the Oprah approach: “You get a credit and you get a credit and everyone gets a credit!”). While this approach drives collaboration, it also drives up costs unless there are firm rules or a governance board in place. It is up to sales management to determine if a person is eligible for a credit. Usually, the Oprah approach is used in quota-based or on-target-earnings (OTE) incentive plans. In other words, a sales person receives a percent of their target incentive based on their actual performance to goal. 

Option 2: Cut up the pie through split credits, which is similar to merit bonuses. Get the knives out because the most aggressive (or smoothest talking) rep will prevail here. This approach gets competitive fast. And, most people won’t put in 100% effort for a small piece of the credit, so managers need to emphasize the bigger picture: the customer, company, and sales person’s career. Traditionally, split credits were used in a commission plan. However, the use of this practice is dwindling. It’s too competitive. And, the debate over split credits takes too much time away from actual selling.

There are a few additional factors to consider. Recently, a client at a global software company asked us, “How many credits should I pay for an $X million dollar deal?” Unfortunately, there is no magic number (though 41 is too many).

Crediting team sales needs to account for the following four factors:

1. Sales strategy. For some companies, consensus selling is critical due to complex products and multi-buyer hierarchy. These are the companies that prioritize collaboration and team selling to get the deal. In our 41-credit example, rep retention was more important than cost.

2. Opportunity. Another factor to consider is the strategic importance of the opportunity. While a sales leader may say they want “any and all dollars,” when it comes down to it, some deals are worth more than others based on margin, new markets, or strategic partnerships.

3. Common sense. Consider the true value a person added to the deal. Just because someone sat on a call or helped with a proposal does not guarantee a sales credit. A majority of sales resources have a percentage of their compensation in base salary, which pays for these standard tasks.

4. Creativity. There are several additional ways leaders and comp administrators can navigate this sensitive topic:   

  • Sales credits should not be used as a carrot (or a stick). It is critical that companies clearly define their crediting approach prior to the team sale, not during or after.
  • Determine whether quotas are individual, team, or a hybrid.
  • A neutral, multi-functional Sales Compensation Governance Board needs to be established to review large, multi-person deals and associated credits.
  • Sales crediting should not be a popularity contest. It should reflect effort and value brought to an opportunity. Ask, “If the rep got hit by an Uber, would this deal still move forward?” While morbid, it provides context to an individual’s contribution.
  • Consider non-incentive rewards such as recognition (win releases, plaques, team celebration dinners, gift cards) in team sales.

There are other considerations when it comes to compensating a consensus sale such as multi-channels, global impact, and resource availability. Establishing well-defined crediting rules is a necessary evil to ensure alignment of the sales strategy, sales organization, and sales behaviors. Keep in mind, without a clear sales strategy in place, a crediting policy is just words on paper. 

Contact us for our latest research on navigating the consensus selling environment or to learn more about how high-performing sales organizations are incenting team selling.

Catch up on last week’s blog about consensus selling and check out additional blogs here.

Carrie Ward

Carrie Ward

Carrie is an experienced consultant specializing in sales analytics, organizational design, and sales process optimization. She is the co-author of The Sales Compensation Handbook as well as numerous sales research studies.