Nothing is harder than truly splitting commission on a deal. There really are two ways that I have seen it: one is that the reps split what would be 100% commission on a deal, or the second is that the company overpays on the deal itself by paying over 100%.
One of these causes conflict without specific rules, the other causes irritation on the part of the manager, finance and commission team as they constantly complain that those reps are getting overpaid and the commission plan is broken. Let’s take a dive into both of these and think about when the situation arises.
The latter of these split types, where there is an overpayment, is used to incentivize the reps to work together in order to close business. You see this with overlays or people who are from teams that are needed to provide expert-type advice to a customer that a traditional rep might not have.
In the other example, you often have a situation where one rep may have been working a geo or account that belonged to another rep but made traction, or they can have a situation where they end up collaborating to get a deal done based on work they will put in on the sale. This example requires more delicate handling and almost always will need management intervention.
So how do you best do splits? Transparency in the beginning is key. Make sure that the reps have this outlined appropriately in their commission plan (or scheme), with an example, and a process that the splits occur by. This is often the case in the overlay example and is done in great detail.
In the example of two reps splitting the commission, this is almost always a footnote, but should come with an example and specifically spelled out conditions. Often you see something like “at management’s discretion” on how the split will be handled. I would avoid this and have a concrete plan in place along with the exact percentages.
You will want a digital trail of the split. Here are the steps for each case:
Case1 – Pay to 100%
- The opportunity is logged in the CRM
- Once logged, the minor player in the the opportunity, will create a split request that should be routed to management
- Management should approve the person who is the deal owner, or major player, and that they will indeed split the deal. It is at this time that a definition of the split percent should be discussed and how credit will be given
- Often these types of deals will eat into the opportunity owner’s commission and this may indeed cause some heartache. This is the downfall of these types of splits and why. It is important to define the upside, which is you actually win the deal
- Once all approvals are had, then let the reps go about the opportunity to close
- Once closed, the deal should have the split associated to it so that when a commissionable transaction arrives, the commission calculator can apply the percent appropriately
- Everyone gets paid and is happy except the main opportunity owner who feels like they got cheated out of commission. Again this is important to sell on your team that something is > 0
Case 2 – Overpay
I call this overpay as it is almost always enriching the deal for someone, while keeping the main owner of the opportunity whole. So if the person who is responsible for the opportunity sells the deal, they will get their cut. If another person got a whiff of it, they get their cut, and so on.
I have personally seen some customers, usually in tech, have 11 ways people can touch one deal. This is big and hairy, and creates a different type of problem, which is that of who entirely receives credit for the opportunity. This has a greater impact on commissions systems than a simple split.
Think about it this way: one deal can pay the main owner, their boss, an overlay, a partner manager, Bob from marketing – I think you get the picture. That’s why this type of split is always important to have defined implicitly with examples as it will cause the most disputes as it is part of the traditional process.
- Define the way a deal can be credited to a team off the opportunity of the main owner
- Create examples
- Be prepared to deal with people crying if they don’t get credit, even if they don’t work on it
- Have a great dispute tool, you’re going to be using it
- You may also need to get a workflow tool that helps you create a chain to the sales transactions so people can just associate themselves to the deal. You see this happen often with partner channel software sales
- Review all those getting credit – have the manager or director approve so you don’t have a friend of a friend getting paid for no reason. This should be a healthy workflow
The other thing you may want to ask yourself is, instead of using splits, have a team-based quota or some MBO metrics.
You can also look at having a healthy base pay by which the reps implicitly understand they are part of a team that closes deals, not a lone wolf (this can go sideways if the management becomes lazy in promoting this message and picks favorites).