Show a salesperson the strategy and they nod politely. Show them the comp plan and they redesign their week around it. Whatever the plan pays for most, new logos, total bookings, the deals that close before quarter-end, is what you will get more of, whether or not it is what the business actually needs. The plan is the strategy, written in the only language a sales floor reliably reads.

The quick version

  • A comp plan is a behaviour spec, not a payroll line. Reps optimise for exactly what it measures, so measure the outcome you want, not the activity that is easy to count.
  • Pay mix (base vs. variable) should track how much the rep controls the sale: more control, more variable; longer and more team-dependent, more base.
  • Caps and quotas can quietly cost you revenue. A field study reported in Harvard Business Review found that removing a commission ceiling and reworking quotas was projected to lift sales ~8%, and realised ~9% the next year.
  • Design for the middle. Steenburgh and Ahearne's research finds core performers, not stars or laggards, are where a well-built plan creates the most upside.

The idea in depth

Sales compensation looks like a finance problem and behaves like a leadership one. Underneath every plan sits the same old tension economists call the principal–agent problem: the company (the principal) wants effort it cannot fully observe, and the rep (the agent) wants income for effort they would rather not over-spend. Commission exists to bend those two interests into the same shape, to make the rep richer precisely when the company is richer. When a plan misfires, it is almost always because that alignment broke somewhere: the plan now rewards a proxy (activity, raw bookings, quarter-end timing) instead of the real outcome (profitable, durable revenue).

flowchart LR
    G(["Company goal
profitable, durable revenue"]) --> P(["Plan: what it measures
& pays for"])
    P --> B(["Rep behaviour
(optimises to the plan)"])
    B --> O(["Outcome you actually get"])
    O -.->|"gap = misaligned plan"| G
The comp-plan loop: reps optimise to what the plan measures, so the outcome only matches the goal if the plan does. Leaders Loop

Start from behaviour, not from a benchmark

The most common design mistake is to start with a number borrowed from a benchmark deck, a 50/50 split, a 4x quota-to-OTE ratio, and reverse-engineer the plan to fit it. Benchmarks are useful for sanity-checking, but they answer "what do others pay?" when the real question is "what do we need this person to do?" Practitioner guidance from compensation specialists converges on the same starting point: define on-target earnings (how much), then the quota and metrics (for what), then the payout mechanics, commission, accelerators, bonuses (how), in that order, anchored to a company goal the plan is meant to reinforce, as compensation-platform guidance from QuotaPath and others lays out.

So write the one sentence first. Before any number, finish this line for each role: "We are paying this person to ______." If the honest answer is "land profitable new accounts and keep them past renewal," then renewal and margin belong in the plan, not just signed bookings. Every metric you add is a behaviour you are buying; add it on purpose.

Set the pay mix to match control over the outcome

How much of the package should be variable? The cleanest principle comes from agency theory: the more the salesperson personally controls whether the deal closes, the more of their pay can sit at risk, and the reward. A transactional rep working short cycles, alone, against a clear quota can carry a heavy commission load (a 50/50 or even more aggressive split is common for such roles). A solution seller on a nine-month, committee-driven enterprise deal, where marketing, product and a sales engineer all touch the outcome, should carry more base, because pinning that result on one person's effort is both unfair and a poor signal. As the sales-force compensation literature summarises it, the four levers are level of pay, the salary-to-incentive mix, the performance measures, and the payout curve, and the mix is the one most worth getting right first.

So tie the variable share to attributable control. Roughly: high individual control and short cycle → more variable; long, team-based, or heavily marketing-fed → more base. Paying big commission on outcomes a rep can't move just adds noise to their income and resentment to your floor.

Caps and quotas: the expensive comfort blanket

Caps feel prudent, they protect the budget and stop one lucky rep from out-earning the VP. The evidence says they can also quietly suppress your best revenue. In "Motivating Salespeople: What Really Works" (Harvard Business Review, 2012), Thomas Steenburgh and Michael Ahearne report a field study by Sanjog Misra and Harikesh Nair in which a firm's model projected that removing the ceiling on earnings and reworking quotas would raise sales by about 8%, and when the company actually implemented it, revenue rose roughly 9% the following year. Once a capped rep tops out, the rational move is to stop selling, or to park deals for next period. The cap didn't save money; it bought a sandbag.

Quotas carry their own failure mode: timing games. Ian Larkin's study of an enterprise-software vendor, "The Cost of High-Powered Incentives: Employee Gaming in Enterprise Software Sales," documents exactly this around period boundaries, reps pulling deals forward or pushing them back, and discounting to close on the timeline most favourable to their commission rather than the company's. None of this means abolishing quotas; it means knowing that any threshold you draw becomes a line people manage to.

Whatever your plan makes easy to game, your best reps will eventually game, not from malice, but because you asked them to with a number.

So prefer accelerators to ceilings. Instead of capping the upside, raise the commission rate on revenue booked above quota, a typical accelerator pays 1.5x–2x the base rate past 100% attainment. You keep the budget broadly in line through quota-setting while leaving the over-achievement engine running, so the rep who can sell more, does. (We unpack how that over-target revenue shows up on the scoreboard in recurring-revenue metrics.)

Design for the core, not the heroes

Most plans are unconsciously built for the top of the floor, the rainmakers who would sell in a blizzard. Steenburgh and Ahearne's central, evidence-based argument is that this is the wrong target. A sales team is mostly core performers, flanked by smaller groups of stars and laggards, and the core is both the largest revenue base and the group most responsive to plan design. Treat compensation as a portfolio: tiered targets and progress markers pull core reps up the curve, varied contests (not just one prize that always goes to the same star) re-engage the middle, and the plan stops being a trophy for people who'd win anyway.

This is also where modern practice has shifted on what to reward. Mark Roberge, HubSpot's former CRO, argues many companies still run 1980s-style plans that pay the most for brand-new logos and almost nothing for expansion, which can quietly fund churn, since the rep is gone the moment the ink dries. Paying for retained and expanded revenue, he argues, points the same incentive engine at durable growth. (That logic connects directly to net and gross revenue retention and to upsell, cross-sell and land-and-expand.)

So instrument the middle and reward what lasts. Build tiers and milestones a core performer can realistically climb, and put at least some of the payout on outcomes that survive renewal, onboarding completion, retained revenue, expansion, so a sale that churns in ninety days doesn't pay like a sale that compounds for years.

The honest limitation: there is no settled formula

Here is the uncomfortable part. Despite decades of study, the academic field is candid that we lack tidy, universal design rules. A recent review of the design of sales-force compensation systems concludes the knowledge base is still mixed and context-dependent, short of general principles you can lift wholesale. The 8%-projected/9%-realised result is one firm (a contact-lens manufacturer), one period, directionally powerful, not a guarantee your cap is costing you the same. Pay mix, accelerator slopes and quota ratios that work in transactional SaaS can misfire in enterprise or channel sales.

So treat the plan as a hypothesis you test, not a law you enforce. Run it for a defined period, watch for the gaming patterns above, and change it deliberately, comp instability is its own cost, so resist tweaking mid-period, but do measure your own cohorts rather than trusting a benchmark to fit your business.

A worked example

The figures below are illustrative, chosen to show the mechanics rather than to report a real company.

A B2B software company pays its account executives a flat 10% commission on new bookings, capped at 120% of a $1m quota, with on-target earnings of $200,000 (a 50/50 split: $100k base, $100k target variable). Two problems surface. First, the best rep, Priya, hits 120% by mid-November and visibly coasts into the holidays, three deals she could have closed slide into January, where she'll "need" them. Second, churn in the cohort is ugly: AEs chase any logo that signs, including bad-fit customers who cancel within two quarters, because the plan pays the same for a keeper and a flight risk.

The leadership team rebuilds the plan as a behaviour spec. They remove the cap and add an accelerator: 10% up to quota, 15% on every dollar above it. They split the payout to reward durability, 70% of commission at signing, 30% once the customer completes onboarding and crosses a usage threshold correlated with retention. And they add a modest expansion bonus for net revenue grown in existing accounts.

flowchart TD
    A(["Old plan: 10% flat,
capped at 120%"]) --> B(["Priya tops out in Nov
→ parks 3 deals to Jan"])
    A --> C(["AEs chase any logo
→ bad-fit churn"])
    D(["New plan: no cap,
15% accelerator above quota"]) --> E(["Priya keeps selling
→ +revenue, no parking"])
    F(["70% at signing /
30% at retained usage"]) --> G(["AEs screen for fit
→ lower churn"])
    H(["Expansion bonus"]) --> I(["Existing accounts grow"])
Same engine, re-aimed: an accelerator replaces the cap, and a split payout ties commission to revenue that survives renewal. Illustrative. Leaders Loop

The behaviours change because the instruction did. Priya now keeps selling in December, every dollar past quota pays more, not nothing, so the parked deals close on time and a few extra land. AEs start qualifying harder, because the back-half of their commission depends on the customer actually sticking, which quietly shifts effort from "any signature" to "the right signature." None of this required a motivational speech. It required changing what the plan made profitable.

Frequently asked questions

What's a sensible base-to-commission split?

There's no universal answer, it should track how much the rep controls the outcome. Transactional, short-cycle, individually-owned roles often run near 50/50 (or more variable); enterprise, long-cycle, team-dependent roles usually carry more base because no single person determines the result. Use published benchmarks as a sanity check, not a starting point. Start from "what do we need this person to do?" and let the mix follow the control they actually have.

Should we cap commissions?

Usually not. Caps protect the budget on paper but train your best reps to stop selling once they top out, and to park deals for the next period, the field study reported in HBR found removing a ceiling and reworking quotas lifted revenue. If you need to control cost, do it through quota-setting, and use accelerators (a higher rate above quota) rather than a hard cap. Keep the upside engine running.

How often should we change the plan?

As rarely as you can while keeping it aligned. Comp instability is a real cost, reps disengage when the rules keep moving, and mid-period changes feel like a bait-and-switch. Set the plan for a defined cycle (typically a year), measure your own cohorts against it, and change it deliberately at the boundary. The academic field is honest that there's no settled formula, so treat each plan as a tested hypothesis, not a fixed law.

How do we stop reps gaming quarter-end?

First, expect it, any threshold becomes a line people manage to, and timing games around period boundaries are well documented in enterprise sales. Reduce the incentive to game by softening the cliff: accelerators that pay continuously past quota beat all-or-nothing thresholds, and tying part of the payout to retained, not just signed, revenue removes the reward for jamming a weak deal through before the buzzer. You won't eliminate it; you can stop paying for it.

Should we pay more for new business or for expansion?

Match it to your strategy and economics. Many legacy plans over-reward new logos and ignore expansion, which can quietly fund churn, the rep is paid and gone before the customer's value shows up. If durable growth is the goal, put real commission on expansion and retention, not just first signatures. See net and gross revenue retention and upsell, cross-sell and land-and-expand.

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