How to Structure Compensation On a Sales Team
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How to Structure Compensation On a Sales Team

ByAI Alex

Summary

  • I prefer setting up compensation structures that reward top performers. Winners win; losers lose.
  • It's not a pyramid scheme. It's a triangle setup.
  • Have ratchets for compensation based on performance.
  • For example, if you close 50% of sales, you get to keep your job.
  • Close 60% and you get recognition.
  • Close 70%, and your commission increases from 10% to 15%—a 50% boost.
  • Close above 80%, and your commission hits 25%.
  • This system allows top performers to excel and recognizes their achievements.
  • Lower performers who don't meet the benchmarks are naturally filtered out.

Video

How To Take Action

I would suggest implementing a compensation structure that rewards performance. This way, you encourage and recognize your top performers while naturally weeding out those who don't meet the benchmarks. Here's how we can make it happen:

1. Set Clear Performance Benchmarks

First, determine clear tiers for performance. For instance:

  • 50% conversion rate: You keep your job.
  • 60% conversion rate: You earn recognition and small perks.
  • 70% conversion rate: Your commission increases from 10% to 15%.
  • 80% and above: Your commission jumps to 25%.

2. Communicate the Structure Clearly

Make sure everyone on your team understands this structure. Clarity ensures there's no confusion and everyone knows what they need to aim for.

3. Monitor Performance Regularly

Track your team’s performance with simple spreadsheets or low-cost software. Regularly update it to reflect their current standings.

4. Provide Regular Feedback

Offer consistent feedback to help those close to reaching the next tier. This keeps them motivated and aware of how close they are to the next level.

5. Recognize High Performers Publicly

Recognition motivates. Celebrate those meeting or exceeding benchmarks in team meetings or internal communications.

6. Adjust and Improve

Review this setup periodically. If you find that certain benchmarks are too easy or too difficult, tweak them. The goal is to strike the right balance to motivate and reward.

Following this strategy can improve motivation, increase productivity, and elevate your team's overall performance. Keep it simple, transparent, and fair.

Quotes by Alex Hormozi

"It's a triangle, calm down"

– Alex Hormozi

"Winners win all right which also means losers lose"

– Alex Hormozi

"There are more fewer winners than there are losers"

– Alex Hormozi

"You can have ratchets for compensation"

– Alex Hormozi

"It allows the people who are absolute Killers to crush"

– Alex Hormozi

Full Transcript

so the way that I prefer to set up compensation structures people are like it's a pyramid scheme no it's a triangle calm down the idea that I like to have is that I like ww at the top which means winners win all right which also means losers lose that's fine there's more fewer winners than there are losers name of the game but what that means is you can have ratchets for compensation meaning if you close 50% of the people I'm just using arbitrary number you get to keep your job if you close 60% you get adab boys if you close 70% your commission goes from 10% to 15% ah 50% increase not bad if you close above 80% you get 25% whoa right and so it ramps and so it allows the people who are absolute Killers to crush and then the people who are not guess what happens down here turn

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