No one likes it when someone steals their thunder.
From the kid who copied your homework and got a better grade to the colleague who got a pat on the back for presenting a report that you put together, we all know those feelings of frustration and unfairness.
And in sales, when your job is defined so precisely in terms of ‘winning’, this is one of the biggest causes of friction.
Sales is a complex and competitive business - and never more so than when deciding who gets the credit for what: who gets the commission and, just as importantly, who gets the recognition?
In this article, we're looking at:
- Salary and commission
- Setting up the rules of engagement for your salespeople
- The key components of these rules
Let's dive in. 👇
Salary vs. commission
A study by the National Association of Sales Professionals found that nearly half of companies pay their salespeople a combination of base and commission.
In their report:
- 18% of respondents used an 80% salary, 20% commission split.
- 16% used a 70% salary, 30% commission split.
- 14% reported a 60% salary, 40% commission split.
Sales enablement doesn’t necessarily have a boots-on-the ground role in determining or enforcing territory allocation or compensation strategy.
But when something has such a massive impact on reps’ motivation, performance and behaviors - the very things you’re trying to ‘enable’ - you’d better have a grasp of the basic principles.
Setting up the rules of engagement
It's usually Sales Operations' responsibility to manage these situations by creating, documenting and implementing the rules around who gets credit for what.
These sales ‘rules of engagement’ determine the crediting philosophy for the sales team as well as how to manage any friction that may arise.
Sales rules of engagement are a critical key to proper sales management.
The goal is to remove ambiguity, prevent conflict, and limit chaos while still stimulating the competitive spirit that leads to high sales achievement.
Here's just some of the things to keep in mind while setting these rules up.
Make account ownership clear
The starting point is to define your crediting rationale.
For example, are you trying to encourage collaboration between reps, or are you aiming to increase sales coverage? Can people be rewarded because they own a territory, or should it be strictly merit-based, based upon the actual effort that’s gone into a sale?
Obviously, there are a lot of variables to consider here - depending on the type of business, the product you sell, the size of the team, etc.
But the bottom line is to establish each sales rep’s territory of accounts and provide clarity about who gets credit for selling into that particular account.
Set the process and requirements for crediting
This is where things can get complicated, especially if you're dealing with global accounts. For example, how do you determine ownership of a global versus a regional deal?
If you have a rep in charge of the overall global account, but you need someone with specialist local knowledge to sell to a particular region, who gets the credit?
You need to put rules into place for this type of situation.
You may decide that when this happens, a global rep always gets a percentage - or that only the rep who closes a regional deal gets the credit.
Key components of the rules of engagement
Sales crediting and bookings
Crediting is an attribution process used to work out sales commissions.
It is calculated based on whatever you use to measure your salespeople’s performance, such as when a rep closes a sale, or makes an upsell - variously referred to as bookings, deals or transactions.
It’s not the same as revenue, which is a very specific accounting term that needs to be calculated in a defined way.
Bookings can be whatever you want them to be, because they're really just an operational way of counting things. For example, you can have one type of booking, which is measured by the annualized value of a deal, and another type of booking, on the same account, which is measured on the total contract value.
It's not uncommon to have multiple types of bookings. There should be a clear agreement about which events in the sales cycle makes a booking qualify for crediting.
Does it need to be in a certain state such as ‘won’ or ‘paid’?
Crediting splits are just what they sound like: split of the credit for a specific deal.
Splits occur when two or more parties each feel like they should get credit for a deal. Either because of account ownership, or work put in to close the deal.
When drafting the rules of engagement, it’s important to be super-clear about when splits can or must occur, as well as which levels get impacted by the split.
For example, do the executives of the company get the split too? Will there be double bookings for the split? (i.e., will two parties get credit for the same thing?)
Another key part of the rules of engagement is the process for crediting unanticipated events: the circumstances in which you either remove quota for a rep, or give them quota relief (quota relief is an adjustment to a sales quota that has already been set).
For example, if an account is closed because of consolidation of that account, you might split out the renewal amount from that rep's quota.
Other companies will set a limit on the amount a quota can be adjusted. For example, the 5% rule states that unless the quota impact is greater than 5% of the total quota, no relief will be given.
These are the rules around the pricing, discounting, and maintenance of accounts.
For example, the rules of engagement may specify the circumstances in which discounting might be offered, or the specific requirements for the business terms of various opportunity types. Another common area that might be covered is early renewals, and when is that permitted.
There's no limit as to what can go into a sales rules of engagement, but to work effectively it needs to be as complete and specific as possible and include the major friction points that occur in a particular business.
It should be viewed as a flexible process, keep revising it as a working document, and manage disputes that arise out of it.
Transparency of your rules of engagement sets the tone for reps’ behavior and helps to prevent and resolve natural conflicts that arise in a competitive selling environment.
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