Should I make my budgets more ambitious?

Dear Aunty B, 

I am doing my budgets and always make them quite low so that my sales staff achieve budget, get commission and stay excited about selling.

I have to do that because my staff actually regard their commission as their salary. They actually use salary plus commission to get bank loans and cars so I feel I have to help them reach that figure!

But my accountant says that I should make them more ambitious so that the sales staff work harder and I will get more revenue. I have an accelerator in the commission structure though so they are incentivised to keep selling even after they hit budget. What do you think?

FG
Brighton

Dear FG,

The trouble with that approach is twofold. One, it defeats the purpose of having a commission. If the staff know – without doubt – they are going to hit their numbers every time, then it makes the purpose of a commission redundant.

Second, if they get commission and then accelerator on top of commission on a low budget then you are more out of pocket than if you made the budget number higher and then put accelerator on top of that!

I agree with your accountant. Up the numbers a bit – but not too much. You don’t want them missing commission month after month as they then get demoralised. And you also need to stress that the commission is not part of their package. It is an incentive.

Mind you, if they want to wave that under a banker’s nose to get a loan, that is their business and should not affect your thinking on budgets and revenue.

Be smart,
Your Aunty B

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