Learn how Sales Operations teams can effectively identify winning KPIs in their incentive plans, eliminate poor performers, and plug commission leakages to optimize sales performance and profitability.

Introduction: Why KPI Identification Matters

Incentive compensation plans are one of the most powerful levers a company can pull to drive sales behavior and business outcomes. Yet, many organizations unknowingly suffer from commission leakages — payouts that don’t correlate with real business value. The culprit? Misaligned or ineffective KPIs.

Sales Operations teams sit at the heart of fixing this issue. By carefully identifying which KPIs drive meaningful results and which don’t, they can optimize incentive plans, plug financial leaks, and boost organizational performance. Let’s dive deep into how Sales Operations can strategically manage KPI effectiveness — with examples — and create more value-driven incentive plans.

Understanding Commission Leakages

Before tackling KPIs, it’s important to understand what commission leakage looks like.
Common causes include:

• Paying commissions for activities that don’t translate into revenue (e.g., pipeline creation without conversion)
• Over-incentivizing low-margin products
• Rewarding behaviors that create short-term wins but harm long-term goals
• Misalignment between sales goals and broader company strategy

Example: A SaaS company paid hefty commissions on new customer signups without factoring in churn rates. Many sales reps focused on quick sales to low-fit customers, resulting in high turnover and lost revenue downstream. Here, the KPI (customer acquisition) was not linked to the business’s sustainable growth goals.

Step 1 – Map Out All Incentivized KPIs

The first step for Sales Operations is to document every KPI tied to an incentive payout. This includes primary KPIs (e.g., total revenue, new logo acquisition) and secondary ones (e.g., cross-sell targets, lead response time).

Questions to ask:

• What behaviors are we rewarding?
• Are there KPIs that duplicate effort or conflict with each other?
• Are there any KPIs with unclear or subjective measurement?

Tip: Create a KPI Inventory Sheet where each KPI is listed alongside the corresponding payout weightage and expected business impact.

Step 2 – Analyze KPI-to-Outcome Correlation

The next step is data analysis: measure how each KPI correlates to real business outcomes like revenue, margin growth, retention rates, and market share.

Approaches:

• Regression analysis to find statistical links
• Win-loss analysis segmented by KPI achievement
• Comparing territories, teams, or individuals performing against certain KPIs

Example: A medical devices company found that while the “number of doctor visits” was heavily incentivized, there was no statistical correlation between visits and sales. However, “follow-up meetings booked after the first visit” strongly correlated with closed deals.

Result: The company shifted the KPI from visit volume to follow-up conversions — immediately reducing unnecessary payouts.

Step 3 – Identify Non-Performing KPIs

Not every KPI needs to survive scrutiny. KPIs that show low or negative correlation with business outcomes should be:

• Deprioritized: Lower their payout or weightage
• Redefined: Adjust the metric to better capture the desired behavior
• Eliminated: Remove from the incentive plan altogether if not valuable

Checklist to assess a non-performing KPI:

• Does it have a clear line to revenue, margin, or retention?
• Is it encouraging the right sales behaviors?
• Can it be objectively measured?
• Is it easily gamed or manipulated?

Example: An IT services company rewarded “meetings booked” without considering deal quality. Sales reps booked dozens of unqualified meetings just to hit targets, wasting pre-sales team bandwidth. The KPI was removed and replaced with “sales-accepted qualified meetings,” aligning incentives with quality pipeline creation.

Step 4 – Design New KPIs Around Strategic Outcomes

Once the ineffective KPIs are purged, Sales Operations teams should collaborate with Sales Leadership and Finance to create business-aligned KPIs. These should:

• Encourage sustainable growth
• Reward profitable behavior
• Align with strategic company initiatives (e.g., land-and-expand strategies, multi-year contracts)

Modern KPI examples:

Step 5 – Monitor Continuously and Adjust Quarterly

KPI effectiveness isn’t a set-it-and-forget-it exercise.
Sales Operations teams must establish a continuous feedback loop by:

• Conducting quarterly reviews of KPI impact
• Gathering frontline sales feedback
• Monitoring for gaming behavior or unintentional consequences
• Adjusting weightages or definitions as business goals evolve

Example: A cybersecurity company realized midyear that incentivizing pure license volume was leading to lots of low-value deals. They pivoted mid-cycle by layering in a margin threshold for commission eligibility — tightening payout criteria to drive healthier deals.

Conclusion: KPI Optimization Is the Secret Weapon

In today’s competitive markets, companies can’t afford to pay commissions for activities that don’t build sustainable value.
Sales Operations teams, with their unique view across data, sales execution, and strategic goals, are ideally positioned to surgically optimize KPIs in incentive plans.

• Mapping KPIs clearly
• Correlating them to outcomes
• Eliminating or redefining poor performers
• Designing smarter KPIs
• Monitoring constantly

It can drive better business results, inspire healthier sales behaviors, and most importantly, plug costly commission leakages.

The next time your team builds or revises an incentive plan, ask: “Are we paying for what truly matters?” If the answer isn’t a resounding “yes,” it’s time to act.