In sales compensation, a ramp refers to a gradual increase in a salesperson's commission or target earnings over a predefined period, typically during the initial stages of their employment. The purpose of a ramp is to provide a transition period for new sales hires to familiarize themselves with the products, sales processes, and customer base before fully taking on their sales responsibilities.
Here's how a ramp in sales compensation typically works:
1. Starting Period: During the initial period, often the first few months of employment, the salesperson is placed on a lower commission rate or lower target earnings compared to what they would earn once the ramp period is complete. This starting period is designed to allow the salesperson to ramp up their skills, product knowledge, and customer relationships gradually.
2. Training and Onboarding: The ramp period often coincides with intensive training and onboarding programs provided by the organization. This training focuses on equipping the salesperson with the necessary skills, product knowledge, and sales techniques to succeed in their role.
3. Increasing Commission or Target: As the salesperson progresses through the ramp period and demonstrates competence and familiarity with the sales processes, their commission rate or target earnings gradually increase. This increment can be based on predefined milestones, time-based increments, or a combination of factors determined by the organization.
4. Full Commission or Target: Once the ramp period is complete, the salesperson reaches the "full commission" or "full target" stage. At this point, they are expected to have gained sufficient knowledge and experience to perform at their highest potential and earn commissions or target earnings at the expected level.
The purpose of a ramp in sales compensation is to strike a balance between providing new hires with an opportunity to learn and adapt while ensuring that they are gradually moving towards achieving their full sales potential. It allows organizations to manage the expectations of new salespeople and mitigate potential risks associated with placing them directly into full commission or target structures without adequate preparation.
By incorporating a ramp period, organizations can invest in the development of their sales team members, improve their chances of success, and reduce the likelihood of early turnover. Additionally, ramps help align the onboarding and training process with the compensation structure, ensuring that salespeople are appropriately rewarded as they progress in their roles.
It's important to note that the specific duration and structure of a ramp period can vary among organizations. The ramp length, incremental increases, and other details are typically outlined in the sales compensation plan or agreement provided to the salesperson upon their hiring.