The Trouble with Troubleshooting Commissions

by | Mar 30, 2020

As a company in the technology industry, we love all things tech! So it should be no surprise that we love Star Trek. There are even a few lessons we can learn from the series when it comes to calculating commissions.

One of our favorite episodes is The Trouble with Tribbles from Star Trek: The Original Series., In that episode, one small tribble causes havoc aboard the Enterprise when it multiplies and multiplies and multiplies until there are so many tribbles on board, they’re clogging the insides of the ship.

In much the same way, one small error in calculating commissions can multiply into a much larger problem if you don’t catch it in time (and it’ll be far less cute to boot). It is so much easier to get ahead of the problem before it damages your organization. The best way to do that is to develop an incentive plan that motivates your employees then select a commission management system that will accurately and reliably calculate their earnings.

So how does a company go about choosing the best plan for tracking commissions?

  • Set targets that are realistic in relation to customers’ purchasing cycle. For example: a travel agency would want to reward their sales team for hitting a year- to- date target instead of monthly or quarterly targets, so that the less traveled seasons have less of an impact on their performance.
  • Use analytics to inform sales goals. An article from the Harvard Business Review states: “Organizations often lose top sales talent because of target-setting that penalizes success. One common misstep is using past performance as a yardstick. If a top performer overshoots her annual target by 20%, her next year’s target is set at 120% of the current year’s — while next year’s target for a rep who achieves just 90% of this year’s target remains unchanged. Not surprisingly, top performers find this unfair and often jump ship.”
  • Create an incentive plan that is motivating for ALL employees. Do this by using big data analytics to identify patterns, market trends, and customer preferences to decide the best key performance indicators for your sales staff. Key performance indicators that are helpful in defining your commission software could include the number of contracts signed per period, income sources, profit, etc.

For employees to get the full benefit of commission software it is crucial that the chosen key performance indicators have a clearly defined data source. Frequent reporting will help staff understand how each performance indicator is being measured and tracked, allowing them to see how their sales translate into compensation. To do this, a commission administrator would need to audit commission calculations and give sales staff access to all of that information, which can be intimidating and challenging with more complex commission rules. However, more automated commission software systems have less room for human error and can generate output reports that allow employees to browse over the figures themselves.

Core Commissions’ Automated Audit View shows all the details of a commission’s calculation in one snapshot with a single click. The tools allow them to see the complex equations broken down by Customer, Product, Order Number, Region, Seller, Revenue, etc.  There is also a dashboard module to see different kinds of info like upcoming payments.

With Core, you can prevent errors from multiplying like tribbles. That way you won’t have to figure out how to teleport an entire generation of mistakes somewhere else.

Schedule a demo today to find a commission management system package that is the right fit for your company.

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