Several studies have shown that high achieving sales people are motivated by financial reward (Harvard Business Review, PsyMetrics, SalesDrive, and others). That’s not to say that all sales people are primarily motivated by money or that money is the only thing that motivates them, but achieving high income is a big factor in motivating behaviour for most sales people and this is particularly true when we are talking about top performing sales people.
So when it comes to the sales compensation and the notion of capping commissions, there are some very real implications. As we have written about before, the comp plan influences the day-to-day behaviour and activities of sales reps (see Sales Compensation Plans that Lead to Great Sales Hires).
As a sales manager, I have used all sorts of carrots to entice reps to work a certain way. I put commissions on new sales and the reps brought in new accounts. I added accelerators and the reps pushed to hit new levels of sales. I added a reward for calls or meetings and reps blitzed to achieve those goals and earn more.
Besides being money motivated top sales reps are very goal oriented so the carrot works well in sales.
Conversely if you cap sales commissions, you remove the incentive to behave a certain way once the cap is reached and a sales rep that is no longer motivated by a comp plan represents a loss of control for the employer. I don’t know too many sales leaders who are comfortable with not being in control so I don’t know too many sales managers that are fans of a cap on commissions.
Perhaps if your company had limited growth plans or barriers to delivering more business, then a cap might make sense to discourage growth, keeping in mind that this may frustrate your best sales reps and potentially cause them to consider other employers where they can achieve uncapped earnings.
If, on the other hand, your company goal is to grow and maximize profits and your compensation plan is profitable at any level, then every new sale represents profit so there is no economic downside for encouraging additional sales and paying additional commissions.
Eliot received his B. Comm. from Carleton University and has been honored as a Top 40 Under 40 Award winner.
He co-authored Sales Recruiting 2.0, How to Find Top Performing Sales People, Fast and provides regular insights on sales team management and hiring on the Peak Sales Recruiting Blog.
Latest posts by Eliot Burdett (see all)
- 20 Of Our Favorite Books About Sales Management and Sales Leadership - October 20, 2023
- How To Make Progress On Your Sales Goal Without A Sales Leader - September 15, 2021
- Augment Your Recruiting Strategy During “The Great Resignation” - July 26, 2021