Managing Sales Commissions More Effectively in 2022: A Few Best Practices
By Jeron Paul, CEO at Spiff
It’s that time of year: the year is winding down, your sales teams are vigorously trying to close the quarter and the year on a high, and you’re planning your sales kickoff for January. It’s a new page for everyone and it’s invigorating.
But, is it for sales teams? Because, if you’re like most organizations, you’re still struggling wildly with planning and managing sales commissions with transparency. As much as organizations have been willing to embrace new technologies in other parts of the business, most have been unwilling to break away from spreadsheets to manage commissions. Spreadsheets remain a very viable scratchpad for organizations, but make no mistake: they do not have the flexibility to manage the complexities global sales teams need when faced with hundreds of different sales commission plans.
The result? Sales teams that don’t trust finance organizations – that are simply handcuffed by inefficient ways of managing a big honkin’ issue. You can hardly blame salespeople: commissions are their livelihood. Businesses still offer sales talent less than other professionals with the “promise” of making up the difference in commissions but then don’t provide visibility into where those sales professionals are throughout the quarter. It’s all a very frustrating process, but there is hope in 2022.
Here are three tips for managing sales more effectively in 2022.
Ditch the spreadsheets. We’ve all grown up with spreadsheets as the main way we manage processes and no place is that truer than in finance departments. But, the time has come. Spreadsheets just weren’t designed to manage the level of complexity that sales compensation brings in 2022. Spreadsheets are the most successful business software ever created and they aren’t going away – but we are in the waning years of spreadsheets as enterprise tools. Spreadsheets will always be amazing scratchpads but they are horrible enterprise automation platforms.
There’s a reason the sales compensation market is projected to eclipse $3 billion by 2026: revenue management has become a top priority for organizations and leveraging innovative software to make the lives of a business’ most valuable asset – its sales teams – is mission critical for success.
Capping commissions is flat out a bad idea. It makes sense why businesses want to do this. The idea that the majority of sales talent will overperform and make a significant dent in your operational expenses is an understandable fear.
But it doesn’t happen for a number of reasons. For one, not every salesperson is capable – or motivated – to overperform. Many are comfortable just hitting their number. And that’s okay. No great team is composed solely of superstars. You need the clutch performers, the steady performers, and the role players. And amazingly, most great sales teams have players that fall nicely into those three camps.
And capping commissions sends the wrong message. It’s demotivating to a group of workers that thrives on challenge. According to HubSpot, turnover in sales is three times higher than other industries. One of the reasons driving sales attrition? Frustration with sales compensation. As we embark on 2022, don’t let The Great Resignation slow down your growth – take care of your sales teams and don’t give them reason to leave.
Team incentives and accelerators will drive revenue. Not only is capping commission a bad idea but you should look for ways to better incentivize sales teams to hit new heights. The best way to do this is by giving every sales performer a chance to overachieve.
As I noted, the teams that have the greatest success are well-rounded. So why not reward that by providing incentives that kick in when teams go above and beyond? Likewise, accelerators, which reward individual high performers, have led to a nearly 20 percent increase in annual sales.
The tools are there for your success. You can look the other way and continue to use antiquated business applications to solve complicated business challenges, or you can attack sales compensation the way you approach any other business challenge in your company – with the right technology and processes to give you the best chance of success. Be clear: this is not one or the other. It is on you to deliver both – the technology and the process – to let your sales teams thrive in 2022 by providing the peace of mind that sales commissions are being well managed, bringing trust back to the process.