Your Sales Strategy Says One Thing. Your Compensation Plan Pays For Another. 

Here’s a question every CRO, CFO and Chief Revenue Officer should be able to answer:

“If my sellers executed my compensation plan perfectly, would they execute our strategy  or sabotage it?”

For many organizations, it’s an uncomfortable question because most companies assume their incentive plans reinforce strategy.

But many compensation plans suffer from a hidden contradiction.

Leadership says one thing. The economics of the compensation plan incentivize another.

Leadership says, “Improve revenue quality.” 

The plan says, “Close more volume.” 

Leadership says, “Grow strategic products.” 

The plan says, “Sell whatever gets you to quota.”

Leadership says, “Protect margin.” 

The plan says, “Maximize bookings.” 

What happens when sales leadership and the compensation plan send mixed messages?

Sellers don’t suddenly stop executing strategy. They execute the strategy incentivized by their compensation plan.

Put another way, your compensation plan is far more than just a calculation engine for commissions. It’s one of the most powerful behavior control mechanisms in your revenue organization.

1. Your Compensation Plan Is (Also) A Strategy Document

Few sales executives would ever treat their incentive plan as a strategy document.

They should. 

Every quota, KPI, weighting, threshold and accelerator communicates an economic statement about what leaders want sellers to prioritize. Look at how telecommunications companies handle contract mix.

Executives make contract mix a strategic priority. They want sellers to focus on a different product mix that delivers greater long-term customer value and margin.

But… 

The compensation plan weights total revenue 65% of variable compensation.

Premium products only account for 10% of total revenue.

Strategic directive: Sell more premium products. 

Compensation plan directive: Maximize revenue bookings. 

Which set of instructions do you think sellers will follow?

Revenue leaders can argue with their sales teams until they’re blue in the face. But until leaders change the compensation plan, they’re just choosing the wrong economics.

The same contradiction exists in SaaS companies, software technology firms, insurance companies and any complex sales organization that sells multiple products, solutions or services.

Leadership can preach margin-conscious growth. But pay sellers primarily on bookings, and sellers will prioritize revenue.

Leadership can say it values profitable growth. But if the economics reward sales volume regardless of profitability, sellers will sell higher-volume deals.

Leadership may want to drive expansion of strategic products. But if those products are lumped into the total contract value with little-to-no incentive differentiation, sellers will gravitate toward what pays the best.

The strategic KPI may exist but does it have enough weight to change seller behavior?

2. The Most Dangerous Misalignment Is Built Into the Plan (Invisible)

Sometimes revenue leaders recognize their compensation plan causes undesirable behavior. But more dangerous are the incentives that blend in with success.

Sales quota still get hit. 

Revenue grows. 

Commission payouts are calculated accurately. 

Annual commissions are paid. 

And nobody questions why the organization rewarded a certain type of revenue growth over another.

Let’s say an insurance producer has two sales opportunities.

One opportunity will produce $1 million in premium revenue quickly, but it has lower profitability and weaker customer retention attributes.

The other opportunity only generates $700,000 in premium but delivers much better economics for the company. It’s also likely to produce better long-term persistency.

Premium volume may drive most of the producer’s incentive opportunity. As a result, the plan’s economics make opportunity #1 much more attractive.

Then leadership asks: 

“What happened? Why aren’t producers selling the business we want?”

The real question is: 

“What business DID we pay them to sell?”

Understanding this concept is important. Sales compensation shouldn’t just be reviewed on revenue growth, quota attainment and payout reports.

Leaders need to see if their plan is actually influencing the right mix of behaviors. And more importantly the quality and sustainability of the revenue those behaviors produce.

A sales plan can hit 110% quota yet completely miss the company’s strategic goals.

3. Align the Economics Before You Blame the Seller

Leaders in Sales Compensation and Revenue Operations should complete a Strategy-to-Compensation Alignment exercise.

Begin with the company’s three biggest strategic priorities.

Next, list the seller behaviors required to deliver on those priorities.

Then compare those behaviors against the incentive plan’s actual economics.

For every major KPI, ask yourself: 

What strategic business outcome does this support? 

How much control does the seller have over this KPI?

How much incentive leverage are we applying to this KPI?

What seller behaviors will THAT leverage cause? 

Does THAT behavior produce the business results we want?

If you’re honest, you’ll likely find gaps. 

A strategic objective granted 5% of a seller’s incentive opportunity may not create enough leverage to alter behavior.

A KPI responsible for 50% of variable pay continues to drive behavior just because no one has ever thought to change its weighting.

A legacy metric may incentivize old products or solutions that leadership is trying to phase away.

Sales compensation should be a continuous process – not an annual event.

Markets evolve. Products evolve. Pricing changes. Revenue models evolve. Customer needs change. Corporate priorities shift. 

YOUR incentive plan needs to change with them.

Your sales compensation software should allow leaders to model plans, simulate payouts, test KPI weightings and analyze behavior BEFORE launching a new plan. Leaders need to understand how sellers will respond to incentive changes. More importantly – leaders need a framework to measure whether changes to the incentive plan actually created incremental value for the business.

Design → Simulate → Deploy → Measure → Learn → Optimize. 

Leaders should constantly be looking for ways to optimize plan design based on real-world behavior and outcomes.

The goal isn’t just to ensure sellers are paid correctly.

The goal is to ensure YOU ARE PAYING FOR THE OUTCOMES YOU WANT TO SEE.

Align sales incentives with company strategy. Learn how to close the compensation strategy gap.

Before you criticize sales team behavior, ask yourself this:

“If every seller behaved exactly as my compensation plan financially motivates them to behave, would my company hit its strategy?”

If the answer is no – stop blaming the sellers.

Go poke around in the plan. 

Because when strategy and compensation conflict, sellers will always follow the dollars. Every. Single. Day. 

And your compensation plan may be winning that argument before executives even realize it’s happening.