How does the commission plan structure work?

Every business runs on a hierarchical structure. On the top of which resides the management authorities. As you come down the hierarchy you come across different levels of the management within the company. One of the most vital levels of all is the sales. The sales department of any company is responsible for the actual money-making process, they have the task to ensure that the company sells a good amount of the products manufactured and makes good profit out of it. 

A big company which has its roots spread all over the word and has offices in many countries, tends to have a more complex hierarchical structure and hence more number of employees, sales executives and representatives. Companies exercise a common practice of rewarding their sales reps on the basis of the sales they have made. The sales reps receive a certain target and are supposed to achieve it.

How does a company reward its sales reps?

Achieving the target that the sales reps are provided by the company takes them halfway closer to receiving a reward, they are rewarded only when they make more sales than what they were assigned. 

  1. Let us try and understand this with the help of an example, if a sales rep is assigned to make a certain sale of, let’s say, 10 lakhs and the rep makes a total sale of 12 lakhs or so, the company then rewards the rep for making the extra sales for it. The sales reps receive a certain cut for the extra profits that they make for the company. 
  1. This involves a mechanism of managing the sales and deciding the cut that a rep would receive. 

Back in the old times, companies followed the method of sales commission planning which was done manually through spreadsheets. This method was quite delicate and demanded utmost accuracy and attention. But as of today, there are many software available which provide the essential structural planning of the commission management. These softwares are called commission management software and these softwares aim at helping businesses track the records of sales made and plan the commissions or cuts the reps are to be awarded.

This software has now eliminated the delicacies as they simply fetch the data and provide the companies with a full-fledged and a detailed sales commission plan. This software is easy to operate and maintain good records of the sales for a company.

What is the criterion set for rewarding a sales rep?

There is a certain important criterion set for the rewarding of the sales cut or sales commission whatever you might call it. The companies decide these criteria and impose them on the sales reps and once the reps satisfy the needs and meet parameters set, are duly rewarded.
The targets that are provided to the rep are called the sales quota which every sales rep is assigned and ought to achieve. Rewarding the sales reps impart a good professionalism and boosts their spirits, in return the reps work with more zeal and put in more effort thereby increasing the productivity of the company and themselves as well.