Decelerator: Sales Compensation Plans Explained

The term 'decelerator' is a critical component in the world of sales compensation plans. It refers to a mechanism that reduces the rate at which sales commissions are paid out once a salesperson has achieved their quota. The concept of a decelerator is often misunderstood or overlooked, yet it plays a significant role in shaping the behaviour and motivation of a sales team.

Understanding the decelerator, its purpose, and its impact is crucial for anyone involved in designing, implementing, or working under a sales compensation plan. This article will delve into the intricacies of the decelerator, providing a comprehensive understanding of this important concept.

The Concept of Decelerator

The decelerator is a feature of a sales compensation plan that reduces the rate of commission once a salesperson has exceeded their sales quota. It is designed to manage the cost of sales and to ensure that the company's profitability is not compromised by excessively high commission payments.

Decelerators are typically implemented in industries where there is a high potential for salespeople to significantly exceed their quotas, such as technology or pharmaceutical sales. They can be a controversial aspect of a sales compensation plan, as they can be perceived as penalising success.

Understanding the Purpose of a Decelerator

The primary purpose of a decelerator is to control the cost of sales. Without a decelerator, a company could find itself paying out a large proportion of its revenue in sales commissions, particularly if salespeople are regularly exceeding their quotas.

Decelerators also serve to align the interests of the salesperson with those of the company. By reducing the rate of commission once a quota has been met, the company encourages the salesperson to focus on profitable sales rather than simply pursuing volume.

Impact of a Decelerator on Sales Behaviour

The presence of a decelerator in a sales compensation plan can significantly influence the behaviour of a sales team. On the positive side, it can encourage salespeople to focus on high-value, profitable sales, as these will yield the highest commissions before the decelerator kicks in.

On the negative side, a decelerator can demotivate salespeople who feel they are being penalised for exceeding their quotas. This can lead to a phenomenon known as 'sandbagging', where salespeople deliberately hold back sales to avoid hitting the decelerator.

Types of Decelerators

There are several types of decelerators that can be used in a sales compensation plan, each with its own characteristics and effects on sales behaviour. The choice of decelerator will depend on the specific goals and circumstances of the company.

It's important to note that the design of the decelerator should be carefully considered to ensure it achieves the desired outcomes without causing unintended negative effects.

Step Decelerator

A step decelerator reduces the commission rate in distinct steps as sales exceed the quota. For example, the commission rate might be reduced by a certain percentage once sales exceed the quota by 10%, and then reduced further once sales exceed the quota by 20%, and so on.

This type of decelerator provides a clear and predictable structure, but it can also encourage sandbagging if the steps are perceived as too steep.

Sliding Scale Decelerator

A sliding scale decelerator reduces the commission rate gradually as sales exceed the quota. The rate of reduction can be linear or exponential, depending on the design of the plan.

This type of decelerator can be more complex to understand and calculate, but it provides a smoother transition and can be less likely to encourage sandbagging.

Implementing a Decelerator

Implementing a decelerator in a sales compensation plan requires careful planning and communication. It's important to ensure that the decelerator is designed to achieve the company's goals without demotivating the sales team.

It's also crucial to communicate the purpose and workings of the decelerator to the sales team, to ensure they understand why it's being implemented and how it will affect their commissions.

Designing the Decelerator

The design of the decelerator should be based on a thorough understanding of the company's sales dynamics and goals. It's important to consider factors such as the potential for salespeople to exceed their quotas, the profitability of different types of sales, and the desired behaviour of the sales team.

The decelerator should be designed to reduce the commission rate in a way that encourages profitable sales without discouraging overachievement. It's also important to ensure that the decelerator is not so steep that it encourages sandbagging.

Communicating the Decelerator

Communication is a critical aspect of implementing a decelerator. The sales team needs to understand why the decelerator is being implemented, how it works, and how it will affect their commissions.

It's important to communicate the purpose and workings of the decelerator in a clear and transparent manner. This can help to mitigate any negative perceptions and to ensure that the sales team understands the benefits of the decelerator for the company and for their own sales behaviour.

Managing the Impact of a Decelerator

Once a decelerator has been implemented, it's important to monitor its impact on sales behaviour and performance. This can help to identify any unintended effects and to make adjustments as necessary.

It's also important to manage the perceptions and reactions of the sales team, to ensure they remain motivated and focused on achieving their sales goals.

Monitoring Sales Behaviour

Monitoring sales behaviour can provide valuable insights into the impact of the decelerator. This can include tracking sales performance against quotas, analysing the types of sales being made, and observing any changes in sales behaviour.

If the decelerator is causing unintended effects, such as sandbagging or a focus on low-value sales, it may be necessary to adjust the design of the decelerator or to implement additional measures to counteract these effects.

Managing Sales Team Reactions

Managing the reactions of the sales team is a crucial aspect of implementing a decelerator. This includes addressing any concerns or objections, providing support and guidance, and reinforcing the benefits of the decelerator for the company and for the sales team.

It's important to maintain open and transparent communication with the sales team, to ensure they feel valued and motivated despite the presence of the decelerator. This can include regular updates, feedback sessions, and opportunities for the sales team to voice their thoughts and concerns.

Conclusion

The decelerator is a complex but important aspect of a sales compensation plan. It serves to align the interests of the salesperson with those of the company, to manage the cost of sales, and to encourage profitable sales behaviour.

Implementing a decelerator requires careful planning, design, communication, and management. With the right approach, a decelerator can be a powerful tool for driving sales performance and profitability.

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