Commission or Incentives - Mythbusted

Posted in Incentivising Performance, Incentive and Recognition, Gifts and Rewards, Sales Incentives

by Iain Thomson on May 28, 2015 2:00:00 PM

What's the difference - and what are they for?

When we talk to sales managers about incentives, we often get asked about commission. As the more traditional method of encouraging people to perform at their best, many old hands in the sales field have got very attached to their commission, and wouldn't want to see things any other way.

There's a lot of misconceptions about the two - how they're similar, how they're different, and how they can be used. Let's dive in and have a look.

Don't commission and incentives do the same job?

Not quite. While both are performance-related rewards, commission is simply a results-linked on-going element of the remuneration package. It disappears into the bank account for household spending with the rest of earnings.

Incentives, on the other hand, provide a special boost to staff or dealer motivation. They inspire and reward extra performance within a particular period. They help to focus the minds of staff on investing greater effort during that time, and create opportunities for publicly recognising exceptional contributions. In fact, some companies who pay commission also run incentive schemes on top to inject extra momentum - it's not an either/or thing!

My staff prefer cash to vouchers or merchandise

While many employees may initially say, when asked, that cash would be their preferred incentive, the reality is that it simply gets swallowed up in the costs of everyday living, and loses its impact in terms of the bottom line. That means it stops being an effective tool to incentivise or motivate. 

Once a team starts to see the benefits that incentive programmes offer, in terms of the flexibility they give them to redeem them on something special, or that they can receive something they've aspired to own, then their perspective may soon change! It's all about demonstrating the value of the scheme - different doesn't mean worse.

Incentive programmes are too complicated and costly to administer

They don't have to be! There's plenty of ways to run them without making them difficult, with simple online interfaces for accessing rewards, and not to mention incentive and recognition providers that'll manage the whole thing for you! Some of the best programmes are uncomplicated and easy to administer - sometimes less really is more.

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How will I know if I’ve got a return on my investment?

There are so many factors to consider, not just seeing an increased profit after deducting the cost of the scheme. The benefits may be long-term, and reach a bit further afield than sales – brand awareness and reputation can also be improved in the short and long term.

A really good incentive programme can be an incredibly effective tool for attracting new talent, particularly among young people who aren't so attached to commission. The return on investment depends on setting realistic objectives, and then being able to measure them accurately.

The sales team are the people who matter, I don’t need to incentivise other staff

It takes people working to the best of their ability at all levels to make a business succeed, and that's why it's important to include all employees, from the top earners to the lowest paid, in motivation schemes. How can a sales team be effective if the people booking their appointments, creating their promotional material, providing back-office support and delivering on their promises are unmotivated and feeling undervalued?

Only rewarding high flying sales executives, for example, is a great way to make people feel unequal and divided, which will have a knock on effect on their performance, as well as on the all-around culture of your organisation.

Our budgets are stretched enough at the moment, We can’t afford incentives

Effective incentive schemes don’t have to be expensive. Rewards such as vouchers can be given in varying amounts to suit any budget, and the reward values don’t need to be high to have impact. Working with a great provider can also see you get bulk discounts, where the value of the reward is actually far less than what you need to spend.

Far more important is the frequency of rewards, and how immediately they can be given to employees.  Vouchers are quick and easy to administer and can be used to provide an instant on-the-spot reward for a job well done. Additional perks, which cost little but have a big impact, can also be used, such as an extra day’s holiday or employee-of-the-month parking space. Think small but effective, think fun and quirky, and you'll be well on your way.

I don’t know what to offer our staff – cash is much easier to deal with

Selecting one item of merchandise to incentivise a diverse range of employees does require specialist skills and resources, and for that reason many companies are choosing to incentivise staff with vouchers, gift cards and e-codes - rewards that give people a bit more choice.

They're as simple as cash to deal with, but far more memorable - they don't get swallowed up in day-to-day expenses, and the act of actually spending them comes with a bit more of a fanfare. Employees should be encouraged to use them to treat themselves as, while using them to pay bills or for groceries is an option, it takes an element of the feel-good factor away from the programme, and the reward will soon be forgotten.

As we said earlier, it's not an all-or-nothing thing - using the right combination of incentives and commission can be incredibly effective. If you'd like to find out more, please don't hesitate to get in touch!

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