Q: How would you deal with a situation if you realize months later that the sales system in your company has calculated the commissions much less than what your employees should be getting?
I’ve implemented and experienced all three sales commission outcomes with sales teams I’ve worked with:
- “Mostly got it right”. When I did this, the top reps made a lot more than I expected — but that’s good. The key here IMHO is not to essentially punish the reps that make a ton from a fair system, by ratcheting things up too much. A bit more here on why the best reps can make so much in a fair program: Why a Great Rep Can Close 9x More Than a Poor Rep, and Even 2.5x More Than a Good Rep | SaaStr
- “Overpaid”. I’ve done this once. But you gotta just live with it. As long as the overall payments don’t break the bank and were within the formula you set, you live with overpaying. At least for that year or period.
- “Underpaid”. Your question. I think I’ve paid sales more than fairly, so this only happened to me once. I made a set of assumptions that made sense with trailing data, but didn’t totally make sense in the end. The accelerators were way too hard to hit.
When I underpaid, I course-corrected. I addressed it. But I waited too long. I waited until it was 100% clear the plan couldn’t be made. I paid up at that point, made a correction, and increased comp going forward by about 50%.
And that was too late.
The learning is, if you are underpaying, you probably need to course-correct within a quarter.
Otherwise, it may just be too discouraging. Even if you pay up later.
A related post here:
(note: an updated SaaStr Classic answer)