Hi, and welcome to another clear-thinking session with Nicola.
This is a complex one, so strap in. The worst mistake you can make when scaling your business is getting the commission structure wrong, because it will erode trust and cost you good people. You absolutely cannot mess around with people's take-home pay.
If you are looking for a rewarding structure that truly drives your team's performance, you need a system that aligns reward with the behaviour you want to drive.
The Critical First Question: What's Normal?
Before setting any numbers, you must look at what is normal and what is expected in your geography and in your sector. A structure that works in the risk-averse UK (often lower basic, lower commission) is vastly different from one in the US (open-ended commission). Make sure you're in the right ballpark.
The Three Pots of Reward
I always categorise rewards into three distinct pots:
- Commission: A percentage of revenue or margin. The essential watch out here is the threshold. Your team must cover the cost of their seat, salary, and toolkit before commission starts. A rough rule of thumb is three times their cost. Commission can also be stepped or offered as a team or individual reward.
- Bonuses: These are singular payments paid out for the achievement of a goal agreed in advance, which can be an activity or a revenue/margin target. These can be paid monthly, quarterly, or annually.
- Perks: These are often low-cost or cost-you-nothing incentives that dramatically boost morale, culture, and loyalty. Think beyond the holiday in Hawaii; simple gestures like linking the Christmas party budget to profit tiers or giving an extra long lie-in day can make a huge difference.
The Golden Rule for Motivation
Whatever you reward individually, there must be no barriers outside of the employee's control. The reward must be for their activity and their output. If they can't control the outcome, you will demotivate people.
Also, a warning: Don't pay out commissions until you've got the cash flow. Make sure your terms and conditions account for delayed payments.
Ready to design a reward structure that works for your bottom line?