A cliff, or commission floor, sets a parameter that salespeople must meet a certain level of sales before they are eligible to receive commissions, as defined by the sales compensation plan.
This can be an effective way to incentivize salespeople to focus on hitting key performance milestones, while also protecting the company from having to pay commissions for underperformance.
However, commission cliffs can also backfire.
For example, cliffs and commission floors can lead to sandbagging. Sandbagging in sales means that a rep holds a deal back intentionally. It could be because they already hit quota for this month or quarter and want to get a head start on the next quota cycle. As it pertains to cliffs though, a rep may realize they can’t pass the cliff this month, so, to ensure they have a greater shot of earning commissions on it, they stall it to the next month.
Cliffs can also demotivate and frustrate reps and cause them to only go after larger deals.
As with any sales compensation structure, it is important to carefully consider the potential benefits and drawbacks of commission cliffs before implementing them. If you do pursue a compensation structure that includes cliffs, use this plan template for guidance, Commission with Accelerators & Cliff.