Shared Commission
Definition: Shared commission is a type of sales compensation whereby income is shared between several salespersons or the overall team depending on their performance as a group. It, therefore, creates a culture of collaboration and teamwork since in most cases, every individual is to benefit from the success of a group rather than how the person performs alone.
Detailed Explanation
A shared commission structure is one in which the sales teams or departments share in the rewards of the combined sales efforts they contribute. This approach has been proven to foster a cooperative environment in which the team members are acting as one rather than competing against each other. Shared commissions are paid by taking the total amount of the sales revenue or profit made by the group and dividing it evenly among all team members.
Shared commission key features:
- Team-Oriented: Supports the cooperative approach where focus is on the overall performance of a team.
- Reward Sharing: It promotes cooperation between team members since the more a team member sells, the more they make for everyone.
- Equitable Distribution: Ensures rewards are distributed equitably among all contributors on the basis of their contribution to the selling process.
- Alignment with Company Goals: Encourages teams to work towards larger organizational objectives by aligning individual efforts with company-wide targets.
Importance in the Sales Process
- Improves Teamwork: By sharing commissions, team members are more likely to help each other and work collaboratively.
- Lessen conflicts: Reduces team members from being competitive in order to develop a positive and supporting working climate.
- Enhances Sales Strategy: Teams are motivated to share insights and strategies, which makes the sales approach more effective.
- Stabilizes Earnings: Smooths out the peaks and valleys in individual income because the team shares in the highs and lows of cycles of sales.
Real-World Example
One real estate agency applies the shared commission approach with the aim of ensuring cooperation among all its agents. The whole concept behind this approach is that when a property is sold, the commission should not be only awarded to the agent who has sold it, but shared among all other agents who have been either nurturing the client or developing the property portfolio. In such a manner, the approach ensures that every person involved in the process is awarded an incentive for the work put in, and hence cooperation and a team dynamic is bumped up.
The sales team of a technology company closes large corporate deals by working in groups. Every deal that gets closed brings the total commission, which is shared among the whole team, not just an individual commission. This way, every team member will want to develop proposals, pitch clients, and finalize deals.