In sales commissions, a decelerator, also known as a de-accelerator or sliding scale, is a mechanism that reduces the commission rate for sales representatives as they fail to meet certain performance criteria or sales targets.
A decelerator is often used as a means to incentivize sales representatives to meet or exceed their sales goals consistently. It introduces a progressive reduction in commission rates as performance falls below predetermined thresholds. The intention behind a decelerator is to encourage salespeople to maintain consistent performance and discourage complacency or underperformance.
Here's a simplified example to illustrate how a decelerator works:
Let's say a sales representative has a base commission rate of 7% on sales revenue. However, the commission plan includes a decelerator that triggers when the rep falls below a specific threshold—for example, when they achieve less than 80% of their quota. The decelerator may decrease the commission rate to 5% for all sales revenue achieved below the threshold.
Here's how it could work:
- If the sales representative achieves 100% or more of their quota, they earn a commission at the base rate of 7%.
- If the sales representative falls below the threshold and achieves 70% of their quota, they earn a commission at the reduced rate of 5% for the entire sales revenue.
- If the sales representative falls further and achieves 50% of their quota, they still earn a commission at the reduced rate of 5% for the entire sales revenue.
By incorporating a decelerator into the commission structure, organizations aim to create a sense of urgency and accountability for sales representatives. It encourages consistent effort, discourages slumps in performance, and aligns sales goals with compensation. The decelerator can serve as a mechanism to address underperformance and incentivize sales representatives to strive for better results.