Six tactics to adjust sales commission plans and incentives during difficult times

Every companies at some points faces a down cycle, tough times or even near death quarters. But how to sell  through very rough seas or even overcome and take advantage of crisis or difficult periods. In this article we share six tactics to boost sales performance and motivate your troops!

When the going gets tough.. The tough get going

At Palette, we discussed with many sales leaders, Chief Revenue Officers, Vice Presidents of Sales or Regional Directors, to understand the tactics to cope with low morale, shrinking sales pipelines and sales targets that seemed more and more far off every day.

Here are a few takeaways to motivate your sales team and help your representatives take over the driver’s seat.

Sales compensation plans restructuring in difficult times.

Guaranteed compensations.

Usually used in the medium term at the beginning of a disruption, guarantees are draws against commissions that enable sales reps to restore their pipeline after a period of decline. As a salesperson, it is very valuable to know your company is supporting you so you can focus on the long term game, which also includes assisting current customers who might be in bad shape too. While waiting for recovery, these non-recoverable draws help go through the economic downturn. Depending on your company’s strategy and cash situation, sales leaders sometimes plan that the guaranteed commissions are then cleaned up when the storm is behind.

Recoverable draws

Recoverable draws are another good opportunity to bolster future commission earnings in the long term. Besides providing sales representatives with financial support, they mitigate risk for organisations as the reps owe the difference if his/her earnings are lower than the recoverable draw sum. On the contrary, if the employee earns more commissions than the draw, the reps get the overage.

Quota relief

Last but not least, during stressful times, it can be beneficial to just reduce the pressure imposed by quotas and targets, that for most part might have been decided and set before the storm. Quota relief consists in adjusting sales quota so that it becomes easier to hit targets or unlock accelerators (see below). There is also a strong psychological dimension. Reaching your goals makes you want to go further, to surpass yourself. Quota relief might just be the nudge your team needed to go above and beyond the initial quota!

Payout curves and accelerators

Payout curves can also be changed with lower threshold performance requisites. This measure suits long-term difficulties as it means overhauling compensation plans. It can be surprising and scary to scale down its ambitions but, over a critical time period, this could just save they day!

When sales representatives exceed quotas, everyone wins and sales accelerators are well known tactics to improve sales performance. For example, once a sales rep hits 110% of their sales quota, they earn a higher commission, boosting their rate from 10% to 12%.

However, very few companies use accelerator programs to really optimize sales performance. Yet, using specific payout curves can really help you motivate your sales without impacting cash burn. For the record, Palette provides a specific feature, “Plan comparison”, to help teams fine tune accelerators.

In the example below, we are considering two commission plans, with distinct accelerator strategies.

Plan A

• From 0% to 10% of the quota: reps earn 6% on closed won deals.
• From 10% to 30% of the quota: reps earn 8% on closed won deals.
• From 30% to 70% of the quota: reps earn 11% on closed won deals.
• From 70% to 100% of the quota: reps earn 14% on closed won deals.
• Above quota: reps earn 20% on closed won deals.

Plan B

• From 0% to 10% of the quota: reps earn 8% on closed won deals.
• From 10% to 30% of the quota: reps earn 8% on closed won deals.
• From 30% to 70% of the quota: reps earn 15% on closed won deals.
• From 70% to 100% of the quota: reps earn 10% on closed won deals.
• Above quota: reps earn 16% on closed won deals.

As you can see, Plan B is more generous with sales reps before they hit 100% of their quota, paying 8% and 15% on closed won deals (see also picture below).

But thanks to Palette’s plan comparison feature, one can immediately see that a more generous strategy doesn’t necessarily impact cash burn negatively. With the second strategy, the company would in the end pay only $3k in additional commissions (+1.8%). So the cash impact is almost insignificant, but the signalling impact can be huge, as it would allow the company to communicate on a more generous commission sales plan and boost morale while sending a strong signal to the team!

Being creative with bonuses and rewards !

Don't forget about building a culture of recognition! Unexpected bonus, small gifts, public kudos, dinner with C-level executives or Sales leaders: here are some ideas you can implement to spice up the daily life of your sales reps!

A shift to the digital.

Covid-19 has arguably changed the way people work fundamentally. In particular, the world of sales has undergone radical changes over the very last few years. Adapting to this new environment is now a pressing requirement. Digital platforms and cloud tools are now at the core of sales strategies. Many solutions have been developed to support the performance of your sales team. Technologies and automation appear now as the future of Sales Performance Management and the covid-19 crisis has forced businesses to shift towards digital solutions enabling your team to focus on what they do best!

There are therefore lots of opportunities that present themselves in difficult times. It’s now your turn to develop the best commission plan strategy depending on your business’s objectives. We’d love to have your thoughts on the above tactics. Feel free to share your feedback to contact@palettehq.com!

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