Compensation is the single biggest lever on how a sales team actually behaves, more than coaching, more than training, more than the process itself. And yet it's often copied from a previous employer's plan or a generic template, rather than designed for what the business actually needs right now.
What a comp plan needs to do
- Reward the outcome that matters most to the business this year, new logo acquisition, retention, or upsell each call for a different weighting, and a plan that treats them the same rewards whichever is easiest, not whichever is needed
- Stay simple enough that a rep can calculate their own commission on a single deal without asking finance. If reps can't predict their own pay, the plan isn't motivating them the way it's meant to
- Avoid rewarding the wrong behaviour. A flat commission rate regardless of discount depth quietly tells reps that discounting costs them nothing, which is exactly what showed up in one of the patterns we cover in our case studies
Common structures, and when each one fits
- Flat percentage of revenue: the simplest option, and often the right one early on, but it doesn't distinguish a healthy deal from one that was discounted heavily to close
- Tiered or accelerated commission: pays a higher rate above 100 percent of quota, which rewards top performers disproportionately. This works best once there's a stable, trusted baseline to measure quota against
- Margin-based commission: pays on gross margin rather than top-line revenue, which protects against discounting directly, at the cost of being more complex to calculate and explain
- Split commission across new business and renewal or upsell: useful once there's a meaningful renewal base worth protecting, so reps aren't purely incentivised to chase new logos at the expense of existing accounts
The questions to ask before designing one
What behaviour does the business actually need more of over the next two quarters? And what's the simplest structure that drives that, given how reliable the underlying CRM and reporting data actually is? A sophisticated comp plan built on data nobody trusts just produces disputes, not better behaviour.
Getting this right is usually part of building the wider sales system, alongside targets, process and reporting, rather than something to bolt on afterward.