A new commission plan for Customer Service Reps

Typically, commission programs are used for revenue generating roles. If your Customer Service Representatives are in a position to influence the customers to buy more, to retain them, to cross-sell them, or otherwise to generate revenue, then this can be a great approach. If they are more fulfillment, helpdesk or troubleshooting oriented, a bonus program might be more appropriate.

If you are just starting out with a commission program for people already on an all-base plan, then funding the commissions will be an issue. For variable pay to really motivate behavior, a number of conditions have to be met:

1. The eligible employees need to have the ability to make the results happen themselves, or as part of a very small team (2-6 people).
2. You need to be able to establish a productivity standard -- know how much you expect the employee to "produce" (/sell/retain/collect).
3. There needs to be true at-risk pay so that the eligible employee will not earn their full market value unless they meet the productivity expectation and earn the full target incentive.
4. There needs to be upside for over-performance. This is the counter-balance to the risk you are expecting them to assume in #3 above. Without the possibility of better-than-expected rewards, the risk isn’t worth it. This means that your top performers (top 10% or so) should earn a small multiple of what is earned by on-target performers (1.5 – 3 times as much, for example).
5. You need to have, or be willing to hire, people in the role with an appetite for the rewards and risks of such a compensation arrangement – willing to bet on their own ability to make a difference, and excited about the prospects.
   

Of course you can move to such an arrangement gradually over time, holding base constant, adding a few percentage points of base to the incentive at target each year (5% or so), improving your goal setting abilities, and learning to manage under a commission program.