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Commission KPIs are defined as the performance elements (qualitative or quantitative) to be monitored to ensure the company's development.
In order to be attractive, motivating and efficient, the KPIs of commission must above all be adapted to their beneficiaries, and particularly to their role and missions!
Indeed, the performance of salespeople in charge of prospecting and qualifying prospects is not evaluated on the same criteria as salespeople in charge of finalizing sales or employees in charge of making additional sales. They all have specific qualitative and quantitative objectives. The KPIs or criteria for their commission are therefore logically different.
However, before determining the KPIs for evaluating the commission of each team, it is essential to ensure that they all follow the following rules:
- Simple. The KPIs must be understood by everyone and quickly assimilated. Otherwise, it is difficult for employees to reach their targets and thus earn their commission. Complex KPIs can lead to demotivation and frustration.
"On the selection of KPIs to determine commission, you really have to focus on simplicity and clarity. Otherwise, the employee doesn't know what to focus on to achieve his objectives."
Aude Cadiot, Revenue Operations Lead at Spendesk
- Linked to the company's strategic objectives. The evaluation criteria for commission are the most powerful means of monitoring the company's business strategy. Depending on the role of each team and the actions they are able to implement, the KPIs must encourage them to achieve the company's objectives.
"There is no magic formula for building a good commission plan. Instead, there are key principles to keep in mind, and the first is alignment with the business strategy."
Aude Cadiot, Revenue Operations Lead at Spendesk
- Transparent and accessible. To ensure that a commission plan works well, it is necessary that the KPIs are easily accessible and fully transparent to all recipients. Otherwise, it is difficult for employees to understand and achieve their objectives.
Once you have these key principles in mind, it's time to define the performance KPIs to be monitored for each pole of the sales team!
1. Account Executives (AE)
The role of the salesperson is to generate turnover. To evaluate their ability to perform and generate business, companies use various KPIs, with turnover (for 62% of companies), qualitative criteria (62%) and sales volume (60%) coming out on top. And on average, companies use 5.4 KPIs to determine the commission part of sales. (Source: People Base CBM Barometer)
We will therefore see which KPIs are the most relevant and the most used by companies to index the commission of their sales.
Business volume
5 main KPIs are used to measure it:
- The quantity of products and/or services sold
- The turnover (CA)
- The number of new customers
- The number of orders for each salesperson
- The average basket
Turnover and sales volume are two of the three most important KPIs used by companies to assess the performance of salespeople.
Depending on the length of the sales cycle, business volume targets will be set on a weekly, monthly, quarterly, half-yearly or annual basis.
The margin
This family of KPIs includes:
- Margin volume (gross or net)
- Margin rate (gross or net)
- The average selling price
- Breakdown of turnover by product
- CAC (Customer Acquisition Cost)
By setting up these KPIs, the company decides to give its sales staff a strong incentive to sell the product(s) and/or service(s) at the highest possible price, but also to focus on the product(s) and/or service(s) with the highest margin. It is also a way of discouraging salespeople from discounting to customers. A grouping of KPIs that has proved its worth with companies because it is used by 55% of them.
The watchword for these KPIs is therefore profitability!
Prospecting and customer follow-up
Lead generation and customer follow-up are two fundamental tasks of the sales profession, one at the beginning of the sales funnel and the other at the end. Although these two aspects of sales can be handled by SDRs and BDRs and CSMs and AMs respectively, depending on the size of the company, they are often part of the sales job.
And among the performance KPIs on these two aspects are:
- The renewal rate of the client portfolio
- Lead conversion rate
- The success rate of responses to calls for tender
- The number of leads/prospects generated
- The quality of the leads generated (qualification rate)
- The transformation (or conversion) rate
- Customer retention rate
- The attrition rate
- Customer satisfaction or customer recommendation rate
- The number of prospecting calls
- The number of prospecting emails
- Canvassing appointments made
- Qualification of the prospecting file
- Cost per lead/lead (CPL)
Customer satisfaction
Customer satisfaction is often the subject of debate among salespeople's performance KPIs, since it is a qualitative KPI, but it is essential for attracting new customers and retaining existing ones. According to the latest People Base CBM barometer, 62% of companies use qualitative criteria in the remuneration of their sales staff.
Popular KPIs in this category include:
- The average frequency of orders
- The NPS (Net Promoter Score)
- Customer reviews (Google, G2, Capterra, etc.)
- Customer Lifetime Value (CLV)
The commission plan for Account Executives at Qobra
At Qobra, the performance of salespeople is solely indexed to Annual Recurring Revenue (ARR). Depending on the ARR a salesperson generates per quarter, he or she receives a different percentage of commission:
- Between 0 and 20K€ of ARR: 0%.
- Between €20K and €50K of ARR: 15%.
- From €50K ARR: 20% (only on ARR above €50K)
For example, if a salesperson generates €65K in ARR over a quarter, then he/she would receive €50K x 15% (i.e. €7,500) and €15K x 20% (i.e. €3,000), for a total of €10,500.
📚 Going further:
Discover the method to define the ideal amount to allocate to the commission of sales representatives!
2. Sales Development Representative (SDR) & Business Development Representative (BDR)
SDRs and BDRs have a specific objective, namely to generate qualified leads for the sales staff. The main KPIs of their commission should therefore be the number of leads generated and their quality.
However, in many companies, the performance KPIs of the Sales Development Representative (SDR) and Business Development Representative (BDR) are not limited to these two KPIs.
And for proof, according to a Tribes survey, here are the KPIs taken into account in the commission of SDRs in start-ups and scale-ups:
- The number of deals signed (39%)
- The number of appointments made (33%)
- Turnover generated (33%)
- The number of appointments made (28%)
- The number of leads sent to sales staff (11%)
- The value of the pipeline created (11%)
Meetings
Selecting an KPI for the number of appointments made and/or completed is an excellent way to ensure that the SDRs and BDRs are generating appointments for the sales people.
On the other hand, by basing their commission solely on this KPI, Sales Development Representatives (SDRs) and Business Development Representatives (BDRs) are not encouraged to assess their prospects' interest in the product(s) and/or service(s) offered. In the end, a proportion of the leads sent to the sales representatives are not qualified and do not result in a sale.
Turnover
To solve the problem posed by the above-mentioned KPI, it should be linked to turnover or the number of new customers. In this way, in order to receive their share of commission, SDRs and BDRs ensure that customers are qualified before sending them to the sales staff.
Other examples of KPIs :
- The transformation (or conversion) rate
- The average basket
In the end, by combining the two major families of KPIs mentioned above, Sales Development Representatives (SDRs) and Business Development Representatives (BDRs) are encouraged to make appointments because they are paid in the short term on this KPI. On the other hand, they are incentivized to ensure the quality of leads as they are also paid for the revenue generated or the number of new customers.
The commission plan for the SDRs at Qobra
At Qobra, SDR performance is indexed to the number of opportunities generated per month and the Annual Recurring Revenue (ARR) generated by those same opportunities.
Depending on the number of opportunities, he receives a different percentage of commission:
- Between 0 and 5 opportunities: €0
- From 5 opportunities: €125 per opportunity (counting the first 5 opportunities)
Then each SDR receives 1.5% of the ARR generated by the opportunities it has opened.
For example, if an SDR generates 8 opportunities in the month of January, and one of these opportunities signs a contract for an ARR of €12K, then the SDR receives (8x€125, i.e. €1,000) and (12K€ x 1.5%, i.e. €180), i.e. a total of €1,180
📚 Going further:
Discover the method to define the ideal amount to allocate to the commission of SDRs and BDRs!
3. Customer Success Manager (CSM) & Account Manager (AM)
Today, it is increasingly common to see Customer Success Managers receiving a commission of their remuneration. And for good reason, their role is essential: to retain customers. According to Dawkins and Reichheld, retaining a customer costs up to five times less than winning over a new one!
Depending on the company, CSMs are even responsible for renewals and additional and/or complementary sales. However, in large companies, this task is often assigned to the sales staff or account managers (AM).
The main KPIs to be taken into account in the commission of CSMs and AMs are therefore customer loyalty and additional and/or complementary sales.
Customer loyalty
The best way to incentivize CSMs and/or AMs to fulfill their objective of building customer loyalty is to index their commission on KPIs such as:
- The rate of contract renewal
- Customer retention rate
- The attrition rate
- Customer satisfaction or customer recommendation rate
- Customer Lifetime Value (CLV)
However, by relying solely on one of these KPIs, they have no incentive to develop the turnover generated by their customers, which represents a golden opportunity for the company.
Additional and/or complementary sales
In order to increase the revenue generated by each customer, it makes sense to also pay the Customer Success Manager (CSM) and/or Account Manager (AM) for the additional and/or complementary sales they conclude. In this way, they have an incentive to bring customers back to renew their contracts. On the other hand, they are encouraged to generate additional turnover by making new sales to these same customers.
To do this, here are some examples of KPIs:
- The rate of additional and/or complementary sales
- Additional income earned (turnover or gross margin)
- The average basket
- The additional sales volume concluded
📚 Going further:
Discover the method to define the ideal amount to allocate to the commission of CSM and AM!
4. Provide visibility and transparency on KPIs
As we saw earlier, it is important to select the right KPIs. However, it is also important that the employees in each division have access to them in a transparent, autonomous and real-time manner. According to a Gallup survey, only 40% of employees say they know their company's objectives.
Indeed, no matter how well a company provides its teams with the best KPIs, if they cannot consult them in real time and at any time, they will have difficulty reaching their objectives. According to an Aberdeen Group study, only 2 out of 3 salespeople achieve their objectives.
"With Excel, they actually had no real-time visibility... It created a lack of confidence, a BlackBox feeling."
Aude Cadiot, Revenue Operations Lead at Spendesk
To date, the majority of companies calculate and manage their commission plans in Excel or Google Sheets. A document to which beneficiaries rarely have access. They therefore have no visibility and transparency in their performance KPIs, their weight in their commission, the formulas for calculating their commission, the amount of their commission, etc. This lack of transparency generates mistrust, frustration, conflicts, but also demotivation and in some cases turnover!
"A commission plan must be clear, simple, transparent and predictable in order to create a climate of trust. You should already give 100% visibility of the model, the amounts and the targets to make sure everything is clear from the start."
Vladimir Ionesco, Director of Global Sales Performance at Doctolib
On the other hand, by using commission calculation and management software such as Qobra, beneficiaries of a commission can at any time, transparently and with complete autonomy, consult the information relating to their commission (KPIs, calculation formulas, amounts, percentage of target achievement, current commission, past commission, etc.). Visibility and transparency contribute to their performance, as they are more motivated to achieve their objectives!
As proof of this, according to a Qobra & Modjo study on variable compensation in France, 61.9% of employees using commission calculation and management software exceeded their targets in 2022, compared with just 30.1% of those using Excel or Google Sheets.
"I know that having that visibility on a deal that can be signed is going to give me motivation to go out and get more deals and to go, to keep performing."
Matthieu Saroli, Enterprise Account Executive at Didomi
The final word...
The KPIs for indexing an employee's commission depend above all on the employee's role in the sales team. Each KPI must encourage the employee to fulfill his or her mission and to serve the company's sales strategy.
Then, once the KPIs have been defined, it is essential to ensure that they are understood by everyone. And to do this, it is essential to follow a sharp communication strategy!
Finally, the best way to ensure that employees achieve their goals is to provide them with real-time, transparent and fully autonomous access to their commission data.
