Sales commission is the variable part of remuneration tied to achieved results. How it is set is the most powerful tool for managing sales, because people do what they are paid for. Commission on turnover leads to pressure for discounts, commission on margin motivates defending the price, and commission tied to invoice payment encourages work on the customer's payment discipline. Equally important is what the system does not reward – care for existing customers, passing on information to colleagues, or record-keeping in the system, which then does not get done. The ratio of the fixed and variable components differs according to the length of the sales cycle: with a long cycle, a high share of commission is unsustainable. The rules must be clear and stable, because frequent changes undermine trust.
See also: Sales quotas, Discount policy, Customer retention.
