Why is commission on its own a problem?
If you run a pure commission structure focused only on sales revenue, you can end up with profitable-looking numbers that are actually eating your margin. A staff member might win jobs by quoting low, which means you are paying their wage and their commission on work that was never going to make you money.
The other risk is what Greg calls a brilliant jerk. Someone can be very good at getting the sale but treat the office admin or the rest of the team badly. Because the only metric that triggers their pay is revenue, there is no lever to pull. A balanced scorecard gives you that lever.
What are the five areas to set KPIs across?
Greg recommends setting key performance indicators across five areas:
- Customer: retention (percentage of customers returning for another job) and growth (new customers)
- People: metrics like punctuality, and whether staff are actually taking their annual leave
- Profit: are they quoting enough margin, or are jobs being mistimed so you are losing money on the work?
- Safety: a defined safety metric relevant to your trade
- Growth: top-line sales, but read alongside the profit metric so you can see whether the growth is healthy
Why does annual leave belong on a scorecard?
When a staff member does not take their leave, it does not disappear. It rolls over year after year and becomes what is called a leave liability. When they eventually leave the business, you pay it all out at once and it can wipe your savings. Tracking leave usage as a KPI encourages staff to take their four weeks each year so that liability does not build up silently.
What is the difference between a KPI, an STI, and commission?
These three things can sit alongside each other rather than replacing one another.
A KPI is a key performance indicator: the measurable standard that determines whether someone qualifies for a payment. A commission policy might use revenue as its KPI. A short-term incentive (STI) is a time-limited bonus you run for a quarter or a month to push a specific behaviour, such as collecting Google reviews, booking jobs before end of financial year, or driving site inspections. Commission is the ongoing structure tied to sales performance.
Greg's recommendation is to decide what is a 365-day expectation (part of the job no matter what, no bonus attached) and what you want to use an incentive to drive for a specific period. If you put money behind everything, staff will chase whatever you are paying for that month and stop doing the things consistently.
How do you use the scorecard to manage poor behaviour?
If your commission policy includes alignment with your code of conduct, you can withhold commission when someone repeatedly breaches it. The key word is repeatedly: one bad moment is human. But if a staff member is consistently treating office staff or teammates poorly, and that behaviour is documented, your commission policy gives you a legitimate mechanism to act.
Greg is clear on one requirement: you need the evidence. You need to be able to say specifically what was said, to whom, and when. Without that, the conversation is unfair. With it, you can point to the policy, show the breach, and apply the consequence that was agreed upfront.
How do short-term incentives work alongside commission?
The structure Greg describes is: base salary, plus commission policy (with its own KPIs around sales performance), plus a short-term incentive running for a defined period on a specific goal. The STI can change every quarter. You might run one quarter focused on Google reviews and the next on job bookings before a key date.
The scorecard template Greg references allows you to link multiple metrics together so that hitting a combination of targets, not just one, triggers the incentive. That way no single number can be gamed at the expense of everything else.
