Studies show that it takes 3 years on average for a sales rep to reach peak performance. Three years is a considerable amount of time, so good reps should be seen as the result of a major investment. Unfortunately, this investment is entirely lost when a good rep leaves over sales commission issues – the #1 reason why sales reps leave.
In addition to losing one’s investment, other costs can exceed $100K! To calculate the real cost of losing a rep over sales commission issues, it’s important to consider all of the following:
- Costs associated with finding replacements (ex: recruiting fees, relocation)
- Costs associated with training new reps (ex: time spent in training)
- Costs associated with on-boarding new reps (ex: sales commission draws)
- Costs associated with lost business opportunities (ex: unfulfilled orders)
- Costs associated with sub-par performance while in training (ex: customer lost)
Simply put, sales churn kills sales organizations because your team needs to spend considerable time screening, interviewing, and training replacements. But what causes sales reps to leave over sales commissions? Here are the main types of issues:
- Failing to pay reps on time. Sales reps have bills to pay. Failing to pay commissions a rep was counting on can be very upsetting (or even cost them money).
- Failing to pay reps the right amount. The disappointment or even anger some reps may feel when paid incorrectly can cause them to leave.
- Failing to appropriately communicate incentive plans. Your reps may feel that their efforts were wasted if their incentive plan didn’t match their understanding.
- Failing to create a level playing field. If your reps feel that some individuals are getting some type preferential treatment, they may vote with their feet.
- Failing to set quotas correctly. About 75% of your reps should meet or exceed quotas. If this is not the case, even good reps may decide to move on.
- Failing to simplify commissions. Any cap or complicated formula can be perceived as a way to prevent reps from earning what they see as earned commissions.
- Failing to provide competitive compensation. It’s important you keep measuring whether enough reps are able to attain a competitive total target compensation.
As you can see, all those boil down to two key concepts: commission accuracy and transparency. To reduce churn, you MUST find ways to improve them and:
- Make sure reps are paid the right amount – on time.
- Provide reps with a way to verify their commissions.
- Simplify compensation plans.
- Spend extra time explaining incentive plans.
- Eliminate all unnecessary plan “gotchas” or caps.
- Avoid distributing confusing sales commission spreadsheets.
- Constantly monitor quota attainment – reserve the right to lower them.
- Own up to any mistake – don’t try to cover it up, apologize, and fix it.
- Make all incentive plans transparent across the organization.
To increase accuracy and transparency, using a sales performance management solution is paramount. Most SPM solutions are automated and so will produce accurate calculations. However, make sure the following capabilities are also available:
- There is a way to enroll reps into plans
- Reps have access to a personalized commission dashboard
- Announcements can be published to those dashboards
- Managers can review team performance
- Administrators can review quota attainment
- A detailed calculation log is available for review
Ready to motivate your sales team, decrease churn, increase transparency, or make calculations accurate? Schedule a demo on our website – or sign up online!