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Finding the perfect formula for your team’s compensation and commission structure is every sales manager’s goal. There’s no one size fits all approach, you must consider the very specific motivations of the personalities in your team as well as the goals of your team as a whole.

There are many benefits to team targets and commissions but there are also many drawbacks. If you’re considering making the move from a traditional, individual goal and commission structure, read on to learn whether it’s a good choice for your team and your company.

Benefits of Team Targets and Shared Team Commissions

1. Fosters a collaborative environment. One of the drawbacks of using individual targets and commissions is that they foster an “every rep for themselves” attitude and aren’t conducive to great teamwork. Picture the scene: your reps are one week away from month-end and they are working their butt off to close as many deals as possible. Are they going to help each other out and focus on what’s good for the team? Hell no! They’re going to do whatever it takes to meet their quota. And so, you’ve fostered an environment of negative competition where some reps will do well while others will flounder. However, had you a team target/commission structure in place, it would be a different story. Reps would be more likely to work together and help each other out; sharing skills, experience and knowledge to ensure that everyone meets their goals, increasing the overall revenue for the team.
2. Reps are more focused on customer’s needs. When you remove negative competition, another benefit is that reps can truly focus on what the customer needs, not just making a quick sale. Is a colleague better suited to this high revenue account? In a team based structure, they’re far more likely to pass the customer over or work together. Plus, where you have bonuses shared amongst the whole team (business development reps, sales reps, account managers, support etc.) customers will undoubtedly receive a better service with everyone working together to meet their needs.
3. Everyone working towards a common goal. When everyone is “in it together”, it leaves little time for office politics and disputes. Team targets and shared team commissions necessitate that everyone is on the same page: to grow revenue and keep customers happy. Poor performers can be motivated to up their game so as not to let down their team. This type of work culture is important for all businesses but especially startups who need to grow quickly. Having everyone performing to the best of their ability is of course a great benefit to your business and will more likely lead to recurring revenue and referrals from happy customers.

Drawbacks of Team Targets and Shared Team Commissions

1. Can be a disincentive to top performers and allow poor performers to coast. If not structured correctly, the big drawback is that this type of rewards structure is that it can be a turnoff for your selling stars. The vast majority of sales pros are competition driven, if they’re not allowed to compete, excel and secure big rewards, some may quickly become dissatisfied. They may also feel the system is unfair if it appears that the team commissions allow poor performers to coast. This can quickly lead to a hostile work environment and at worst, the loss of your team’s best sellers.
2. Can be a cause of disruptive conflict. Though the goal of the team based structure is to encourage everyone to work harmoniously, the opposite situation can also arise. Instead of upping their game, low performing reps may feel stressed/anxious at not “pulling their weight” and bringing the team down. While at the same time, conflicts can arise if higher performing team members believe someone is putting their commission at risk.

There are many ways of structuring targets and commissions for your team and often a balanced approach, where a percentage of a reps targets and commission are team based is the best approach. In the CPSA’s Professional Sales Management Program, you can learn how to develop motivational rewards and compensation plans that will move your team to their best ever performance.