Two-thirds of sales people fail to meet their annual sales targets (Aberdeen Group study[1]); Excel spreadsheets still rule. Too many companies are still allocating sales commission manually; Two-thirds B2B companies say that the productivity of their sales teams is their number one challenge (Bridge Group report).

What’s going on here? Surely sales people are motivated to generate as much compensation as possible? Are the targets too high, are the benefits capped, or do sales people just not know where they are in the commission cycle?

Companies have usually implemented the soft methods. They have defined coherent objects, organised training and skills development and they’ve established a positive corporate culture and team spirit. So is what is it that’s suppressing productivity?

Could it be the compensation plan? We’ve discovered that a decent commission strategy can be a powerful performance driver. It generates loyalty and encourages sales staff to exceed their targets, which in turn drives the business forward.

As Mark Roberge, the VP of Sales at Hubspot notes; "whether you're CEO or Sales Director, the sales compensation plan is probably the most powerful tool you have to drive sales strategy”.

So how does a flexible, real-time compensation plan work? Here’s what we have found works at Qobra.

Offers transparency on earnings

The rules of the game must be transparent to employees. It’s hard to motivate sales people with something they can't see. If you’re not careful, the lack of visibility on commission brings the team to a standstill. It becomes an unknown, a magic number to be conjured up at the end of the quarter.

As Aude Cadiot, Revenue Operations Lead at Spendesk says, "The lack of visibility on variable pay creates a lack of confidence, it creates a sense of BlackBox."

Real-time visibility shows the team exactly where they are in terms of commission. This also means that management can see who’s performing well… and who isn’t. The information makes it easier to take strategic decisions.

Encourages exceeding targets

Sales people love a target. But they also want to see when they make X% of their target or meet a financial milestone. Plus, it makes it easier to include bonus accelerators. So the team can see how close they might be to unlocking new level.

Real-time information shows the sales team exactly where they are. They can see the impact this will have at the end of the month too. If you don’t know how close or far you are to a target, or a potential bonus, you can’t double your efforts in time.

A good commissions plan encourages sales people to outperform, not to question their salary. We tested this in France and found that 61.9% of employees using commission calculation and management software exceeded their targets in 2022, compared with just 30.1% of those using Excel or Google Sheets[2].

It does this by resolving many of the issues with Excel or Google Sheets.

• Automatic data gathering. A variable pay management tool will gather sales reps’ data from the companies CRM or ERP system. It brings together the sales generated, number of new customers signed, commitment period, sales volume and any other useful data.
• No manual import. This also saves time for the department overseeing variable pay, and reduces human error. (It still allows for manual changes if needed).
•  Implements once. This means that different commission models can be reused for the same positions, while still being able to adjust for small variables. The tools also link directly to the company's HRIS and payroll software.
• It offers a chat functionality. Commission can generate a lot of back and forth discussion. A variable pay system centralises specific exchanges and requests on a single page.
• Commission visibility. Users can see all their commissions without being able to modify them. This improves trust between departments and reduces time responding to commission queries.

Benefits other departments

Calculating bonuses has an impact for the Finance or HR teams too. Managing variable pay with Excel is not without risk; it’s a manual tool. We all know that somewhere there will be a broken formula, an opaque calculation, slightly clunky UX. Our research found that only 22% of employees have a tool to calculate and manage commission that isn’t Excel or Google Sheets[3].

It takes time to do the calculation and then errors and late payment cause friction between the departments. This can lead to poor motivation and performance all round.

A real-time, automated system reduces the burden on the teams that have to calculate the bonuses. It gives HR and Finance automatic retrieval of sales data, automated commission calculation, easy configuration and modification of commissions plans, simplified inter-user communication, automated data analysis and processing and finally, automated sending to payroll.

All this dispels the idea of an opaque system and therefore reduces challenges. A happy sales team is one less likely to experience churn.

Drives the business

Ultimately, this all benefits the business as a whole. A transparent commission plan is a powerful lever for commercial efficiency and, more broadly, a powerful tool for the company's commercial strategy.

It can improve productivity across the organisation. Last year the UK was fourth out of the G7 countries in productivity assessed at GDP per hours. Just above Italy, but about 15% behind Germany (top) and the USA (second)[4].

The sales team is often the engine room of an organisation. Improving sales performance is a major challenge for companies facing productivity and sales target achievement challenges. A real-time, automated compensation plan offers numerous advantages by simplifying commission calculation, improving transparency and providing real-time visibility on results.

Getting this right will drive the business forward and benefit the entire organisation.

add a section on how commission management platforms can provide this visibility easily, automatically and in real time.

Antoine Fort is Co-founder and CEO of Qobra

[1] Motivate, Incent, Compensate, Enable: Sales Performance Management Best Practices (anaplan.com)

[2] https://www.qobra.co/blog/study-on-commissions-in-france

[3] Étude sur la rémunération variable en France.pdf (hubspotusercontent-eu1.net)

[4] Productivity: Key Economic Indicators - House of Commons Library https://commonslibrary.parliament.uk/research-briefings/sn02791/#:~:text=UK%20labour%20productivity&text=Productivity%20was%20up%20by%200.7,slowly%20(see%20chart%20above).