Rethinking Sales Compensation: Are You Incentivizing Busy-ness or Business?

Of all the levers a business leader can pull, the sales compensation plan is one of the most powerful—and one of the most frequently miscalibrated. We design these plans with the best of intentions: to motivate our teams, drive revenue, and hit our targets. But in our pursuit of top-line growth, we often create incentive structures that reward the wrong behaviors. We incentivize "busy-ness"—closing any deal, regardless of its quality—instead of building sustainable "business."

The classic, revenue-at-all-costs compensation model is a relic of a simpler time. It creates a system where salespeople are heroes for hitting their number, even if they do so by signing low-margin clients who churn after six months, or by giving away discounts that cripple profitability. As a business owner, you must ask a hard question: is your compensation plan a strategic tool for building long-term value, or is it just a very expensive way to encourage short-term thinking?

The Problem with a Revenue-Only Focus

When the primary (or only) metric for a sales commission is top-line revenue, you are implicitly telling your team that all revenue is created equal. A €100,000 deal with a 10% gross margin is treated the same as a €100,000 deal with a 60% gross margin. This inevitably leads to a focus on volume over value. Salespeople, rationally following their incentives, will chase the easiest deals to close, not the most profitable or strategically important ones. This creates a downstream nightmare for your finance, operations, and customer success teams who are left to deal with unprofitable, high-maintenance clients.

From Commission to Contribution

The first strategic shift is to move from paying for "commission" to paying for "contribution." This means incorporating gross margin or profitability directly into the compensation plan. A salesperson's reward should be tied not just to the size of the deal, but to the actual profit it contributes to the business. This single change has a profound effect: it instantly aligns the sales team's interests with the long-term financial health of the company. It turns them from revenue-chasers into business-builders.

Rewarding the Full Customer Lifecycle

The second critical shift is to reward behaviors that drive long-term value, not just the initial close. This means incorporating metrics like customer retention, upsell/cross-sell revenue, and even customer satisfaction scores into the variable compensation plan. When a salesperson knows their bonus is partly dependent on whether the client they signed is still happy and growing a year later, their entire approach changes. They become more focused on finding the right fit, setting realistic expectations, and ensuring a smooth handover to the customer success team. This breaks down the traditional silos between sales and service, creating a unified focus on the entire customer lifecycle.

Redesigning a sales compensation plan is a complex, high-stakes exercise. It requires sophisticated financial modeling and a deep understanding of your business's unique value drivers. However, getting it right is one of the most powerful strategic moves you can make. Our Sales Compensation Plan Simulation engagements are designed to help you model the financial and incentive impact of new plans, ensuring you build a system that rewards the creation of real, sustainable business value.