Understanding the Causes of Commissions Friction

Look up the synonyms for friction in a thesaurus and the list isn’t particularly pleasant: conflict, dissension, rubbing, strife, antagonism, resistance, disagreement, abrasion, discord, and hostility, among others.The word itself derives from the Latin stem frictio, or a rubbing against.

 

While its connotations are not the most positive, friction is certainly an apt description for what results when most OEMs and distributors handle their commissions process. Grappling with the monstrous calculations of who is owed what percentage given the terms of which contract can be overwhelming.

 

With the complicated nature of calculating commissions and the lack of a central system or tool at their disposal, many sales operations and finance teams perform this function with an Excel spreadsheet. Inevitably, miscalculations are made—and when they are, the result can cause intense back-and-forth and create friction in relationships between reps, distributors, and an OEM’s staff.

 

Taking steps to reduce friction will benefit any company looking to streamline its commissions process. And understanding what causes friction in commissions—and why—can help you improve how you handle this necessary yet inordinately stressful business function.

 

Cumbersome process

The biggest driver of friction in commissions calculation is the error-prone, cumbersome process many companies use. The percentages and contract rules for commissions are, in many cases, captured in an Excel spreadsheet, which is then used to calculate who is owed how much and for what transaction each month. A process like this is highly vulnerable to human error. Imagine an errant keystroke that changes a formula or wipes out the contents of a cell, for instance. And doing these calculations for transactions at scale can take many hours for administrative staff.

 

Variability

Excel spreadsheets and other administrative methods don’t offer a lot of flexibility when it comes to the variability of commissions. Different reps may receive varying percentages on particular contracts, depending on the relationships they hold, the seniority they have, and the incentives they have been offered. Without a powerful tool or central system, it can be enormously challenging to keep tabs on (and correctly calculate) the various nuances of commissions rules.

 

Visibility

When commissions are calculated once a month and there is little to no visibility into what is happening, unwelcome surprises can result. For instance, consider the effect of a large product return on a commission calculation, especially when the rep has no idea it’s happened. Without visibility into the process and access to a single source of truth, trust and understanding can suffer. And, when changes do happen (as is inevitable) logging and tracking them in Excel can quickly become a headache for administration.

 

Relationship damage

When mistakes happen and incorrect commissions are calculated and paid, the commissions process can sully the relationships between reps, distributors, and OEMs. Trust and understanding erode as finger-pointing and frustration rise.


Real-time visibility into commissions and access to reports and archived data can be a game-changer for reps, in addition to freeing time for both reps and administration by reducing interactions and necessary communication and, overall, enhancing relationships rather than eroding them.

 

Resource drain

The heavy administrative burden commissions calculation requires can mean a great number of person-hours. And when mistakes happen, an OEM’s staff gets caught up in the back-and-forth communication required for a resolution. That situation can result in a non-optimal allocation of resources—and added time and cost, which drag down productivity.

 

Calculating monthly commissions can end up being something companies dread. But it doesn’t have to be. The promise of digital transformation gives OEMs and distributors automated tools that change how cumbersome processes are handled, ultimately freeing resources and reducing the potential for human error. Imagine taking the cumbersome commissions calculation and its associated scores of administrative hours and turning it into an automated process that takes three steps and just a few minutes.

 

When that happens, the process is smooth. Checking out that thesaurus again, you’ll find that this word’s synonyms include even, slick, quiet, calm, easy, peaceful, and tranquil. Don’t those have a nicer ring to them than friction?

 

ImplantBase is a leader in digital transformation for the orthopedic implant industry. Its platform provides manufacturers of every size with a unique cloud-based solution that transforms how the business operates on every level and across your critical functions of finance, sales, and operations. That means bringing automation—anhttps://www.powerthesaurus.org/smooth/synonymsd revolution—to scores of mission-critical business processes, so that your team can stop flailing in chaos and start driving improved performance.

 

If you’re ready to transform how you handle commissions—and other functions—ImplantBase can help. Give us 30 minutes to assess your performance and help you determine a roadmap to digital transformation—and we will also demo our newly redesigned Commissions module.  

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