Sales commission planning is as much science as art; it needs to make financial sense and be logistically feasible, but it also needs to be aspirational to drive sales.

In the previous article, I outlined the steps companies should take when first building or reappraising a sales commission plan. This article focuses on the next step: best practices. Once you’ve got a plan in place, this list will help you get the most from it.

So, what do the best sales commission plans do?

They Build Toward Business Goals

If your commission structure doesn’t support (or worse, hinders) your company vision, it will quickly become unsustainable. Above all, keep business goals front and center in your sales commission planning to make sure you’re building towards them. Remember that this means revising it whenever your business goals change.

They Recognize Strong Performance

Every generation likes to think it’s different, but at bottom everyone strives for recognition. It may be true that Millenials are more likely to appreciate flexibility in terms of work parameters, and older businesspeople prefer tangible goods or experiences, but overall elite status works as a motivator across the board. I don’t mean standing up on a stage, having a famous actress give them flowers – I mean the CEO going out of their way to recognise a job well done. People appreciate it, and they’ll work harder if they know their work will be noticed.

They Make Sense

As I’ve said before, a commission plan should be clear and unambiguous. A confusing or overcomplicated plan is a disservice to your employees and you; they’ll be discouraged by not knowing where to invest their energy, and you’ll have too much to keep track of. The most effective plans are concrete, straightforward, and easy to understand for all involved.

They Pay Based on the Big Picture

Pay bonuses or commission based on gross margin – not revenue or sales targets. Focusing on margin encourages salespeople to maximize each and every sale, and to focus their energies on the most profitable opportunities – not just the most likely ones. It also forces them to be more considerate in offering discounts.

Anticipate (and Eliminate) Loopholes

As with the previous point, remember that the goal is to incentivise strong performance – not encourage shrewd strategizing. Test and retest your commission structure to make sure you’ve anticipated and prevented every way it could be “played.”

Deliver on Promises

We sold a company a few years ago where people would close a deal and could expect to get their commission cheque the day it was promised, for the full amount. That sent a phenomenal message to employees that this was a company that sticks to its word.

That company was subsequently acquired by a larger organisation, and the commission plan was switched in transition. All of a sudden, salespeople found they had to negotiate or chase after their commission for months to get what they were owed. That was disastrous for morale, and it completely undermined the value of performance-based compensation. It takes a long time to earn back that confidence, once lost, so do everything you can to honour your word and build a system employees can rely on.

The most successful strategies understand both sides of the equation – the business’s needs and employees’ expectations – and can harmonise the two according to these best practices. The result? A well-executed plan that’s as efficient in form as it is motivational in content.