Here at Sales Cookie, we help SMBs automate their sales incentive programs. Sometimes, our customers need to split sales commissions between users or teams. In this article, we describe common ways to split commissions, including:
- Splitting commissions between reps
- Splitting commissions between teams
- Splitting commissions via deductions
Are You Splitting The Same Amount?
In most cases, the amount (credit) to split across individuals is the same. For example, you could decide to split each sales transaction’s revenue between 2 reps (ex: based on their salaries). Or you could decide that each rep should be credited with each transaction’s full revenue.
In other cases however, the split is not really a split. This happens when crediting must be based on different calculations. For example, you could decide that account executives should be credited with each transaction’s revenue – but that marketing employees should be credited a fixed amount for the same transaction (ex: $150 if they sourced the sale).
- If each transaction’s amount (credit) should be split between individuals, then you should create one incentive plan configured to split amounts
- If crediting should be calculated differently based on the individual / role, then you should create separate incentive plans, each calculating crediting its own way
In this article, we’ll focus on the first scenario – i.e. situations where each transaction’s amount (credit) needs to be split. To handle the second scenario, simply create multiple incentive plans, each performing its own calculations over the same sales transactions.
Splitting Commissions Between Reps
In many organizations, multiple reps contribute to a sale. For example, crediting may need to be split between account executives (AEs – responsible for account management) and account development reps (ADRs – responsible for securing new deals). Or crediting may need to be split between sales development reps (SDR – responsible for prospecting), and AEs.
When you import sales transactions (manually, or from a CRM or accounting system), you can map multiple fields to the “Owner / Sold By” category. This indicates that all those users should, by default, be credited for the same transaction. Below is sample sales transaction data, as well as how you’d map fields to indicate this. Note that both the “AE” and “SDR” fields were mapped to the same “Owner / Sold By” category.
With this in place, the system is able to concurrently credit AEs and SDRs for each sales transaction. Next, you should define how you want to split credits when multiple reps are involved – for example you could decide to:
- Skip the transaction
- Generate a system alert
- Split the transaction’s credit value equally between users
- Split the transaction’s credit value based on salaries (or weights)
- Assign each transaction’s full credit value to each rep
As previously explained, should you need to split credits in a more elaborate way, you can always create separate incentive plans. Each plan can then be configured to target a specific crediting field (ex: only the “SDR” field), and use its own scoring formula to calculate credits.
Let’s discuss an edge case. Sometimes, the individual referenced by a transaction’s crediting field happens to be invalid. For example, it could designate a rep who is no longer employed. In this case, we can check if the sales transaction specifies a team / territory. We can then assign the transaction’s credit value to members of the team, and split the credit equally between them. Other options are also available.
Splitting Commissions Between Teams
Most incentive plans credit individual reps because the intent is to measure individual performance. However, other incentive plans need to measure collective performance. An example of this is a territory bonus plan, whose commissions are based on the territory’s revenue. To measure the territory’s performance, each transaction’s credit value should be assigned to teams (not individuals). To do this, we can create a team-based incentive plan:
Now, what should happen if a sales transaction references multiple teams? Here again, we need to split each transaction’s credit value – but instead of splitting it between reps, we need to split between teams! Here is how you can configure splitting between teams:
Finally, suppose that team “New York” was credited with $100,000 in revenue, triggering some commissions based on an attainment schedule. How do we assign actual commissions? Rewards can’t be assigned to teams – they need to be assigned to individuals!
Therefore, when configuring rewards for team-based plans, we also need to indicate how rewards should be assigned. In this example, 10% of revenue is split between team members based on their salaries. Of course, if the reward goes to the team’s manager, no splitting is required.
Splitting Commissions Via Deductions
In some industries, commissions are split differently. For example, in real-estate, it’s common for many parties to be involved in each transaction – for example a loan originator and a loan processor. Each loan processor must be credited with a certain amount for each transaction. And each loan originator must be credited with another amount for each transaction. However, this may result in double payment of commissions if the loan processor is the same as the loan originator.
Instead of splitting commissions between loan processors and loan originators, we need to solve the problem differently. First, we can create 2 separate incentive plans, each calculating commissions for loan processors and for loan originators. At the same time, we can create a third plan, which will issue negative commissions in the form of deductions. Our deduction plan can check if the loan processor and loan originator were the same. If so, our deduction plan applies a negative commission to avoid double payment of commissions.
Splitting commissions is an advanced topic. Often, splitting can be avoided altogether by creating separate incentive plans – each targeting a specific role, crediting field, and crediting logic. Splitting may also be avoided using deduction-based approaches.
However, there are cases where splitting is unavoidable. This happens for example when using team-based incentive plans. When rewards must be assigned to team members, a splitting strategy is required.
Sales Cookie is designed to handle any split commission scenario because it offers an extensive set of advanced options, crediting formulas, and more. Visit us online to learn more about how you can automate your sales commission program!