Commission plans drive production type, volume, and profitability. Leading executives exploit this fact to align production to corporate goals. Following are components of successful commission plans:
Set clear objectives at the corporate level. These goals will include origination channel mix, loan product mix, volume, and profitability details.
Tailor commission plans to corporate goals. Executives regularly incent originators based on one or more of the following variables: number of loans, value of loans, value of fees, type of loans, and lead source. Once the most relevant set of variables has been selected, tiers, splits, and associated incentives must be established. Remember: expect what you incent. Each decision will elicit a distinct response from your originators. The key is to establish a sound framework that allows flexibility over time.
Communicate effectively. Commission plans must be easily understood by originators in order to motivate successfully. The most important component of commission plan communication is the detailed Earned Commission Statement which should accompany every check. In addition to serving as a positive reminder of performance, the statement will help increase production. It is estimated that sales representatives spend up to 20% of their time forecasting and auditing commissions. Earned Commission Statements allow originators to reallocate this time to revenue-generating activities.
Pay quickly. Our most aggressive clients pay commissions daily. When asked why, all stated that they considered speed of payment to be a competitive advantage when recruiting and retaining the best originators. However, with speed comes risk. It is important that you have clear policies for limiting payout risk and recapturing commissions for cancelled loans.
Pay accurately. Originators expect to be paid precisely. Failure to do so directly affects credibility and is an inefficient use of management and staff resources.
In order to address the commission design and administrative needs of our clients, Del Mar Database created CommissionTrac. CommissionTrac is a robust commission management and communication system that integrates seamlessly with DataTrac to automate the entire commission cycle. Through CommissionTrac, executives can add an unprecedented level of control over production incentives while decreasing administrative burden. Key features include email alerts and web-based commission reports for originators, management oversight console, fee, draw and commission recapture, program-based payout timing, and robust reporting.
For more information, contact your Del Mar Database account manager.
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