Why Compensation Execution Breaks at Scale and How to fix it

Sales compensation plans are meant to be powerful tools to influence revenue behaviour. But while organizations will invest considerable resources into designing incentive plans, precious little attention is paid to actually executing those plans at scale.

What’s achievable with a handful of sellers breaks down when you have to payout hundreds or thousands of individuals across the globe.

If you’re ready to tear out your hair wondering why and how to fix compensation execution at scale, this is the guide for you.

A. Understanding the problem: Scale & Compensation Execution 

An organization’s complexity does not scale linearly with its size.

Every new product, geography, overlay, sales channel, partner program, hybrid role brings additional levels of crediting and payout logic.

However, at a low number of reps, workarounds exist to absorb this complexity. Finance manually reconciles spreadsheets. Sales Ops emails leaders to manually validate credits. Approvals are routed through people’s inboxes. 

At scale, these operational hacks become bottlenecks. More specifically, compensation execution starts to suffer when:

1. Raw data volumes overwhelm manual processes 

2.Product/service credits overlap 

3.Plans have too many moving pieces with no clear owner

4. Technology is unable to integrate with expanding GTM suites

And all of this leads to delayed payouts, disputes, lost revenue, and sellers who don’t trust your compensation program.

B. 5 Reasons why compensation execution breaks

Now that we’ve covered the whys of broken compensation execution at scale, let’s dig into specific examples of where execution falls short and how you can plan for it.

1. Disparate & Inaccurate Source Data 

Compensation requires a LOT of upstream data flowing into your incentive plan. What sells in your CRM. When it’s recognized as revenue in ERP. Who is eligible based on headcount counts in HR. Quota targets. Territory assignments. 

At a small scale, companies can function with siloed data systems.

a. Multiple CRM deployments post-M&A 

b. Localized ERP deployments by region 

c. Partner systems with no central integration 

d. Manual imports of quota and planning files 

But once you start scaling data integrity issues rear their ugly head.

Scale Break Point #1:  Having disjointed or inaccurate data sources brings inherent risk to your compensation calculations.

Example: A SaaS company grew aggressively by acquisition. Each geography maintained their own sales systems resulting in deals being recorded as bookings in one system and revenue in another. This led to duplicate commissions being paid on the same deal worth $ millions every year.

2. Crediting Errors & Overlaps 

What’s considered a “sale” has never been more complicated. Consider: 

a. Overlay specialists who close deals but need to share commissions

b. Channel partners assisting in sales 

c.  Deals split by geography or product 

d. Account ownership changes halfway through a quarter 

Your crediting rules need to be flexible enough to dynamically adjust to your sales org’s motions.

Scale Break Point #2: Execution breaks when your crediting logic isn’t dynamic enough to account for your evolving sales model.

Example:  An industrial equipment manufacturer had sales specialists selling overlay products that were promised incentive credits by leadership. However, these crediting assignments were not correctly mapped in compensation, and had to be manually back-filled 6 weeks after quarter-end.

3. Plan Complexity Exceeds Spreadsheet Capacity 

Plan designers love math. They also love using compensations plans as competitive differentiation.

Which means you’ll often see fancy mathematically constructs designed to incent the “right” behaviours.

Accelerators, decelerators, SPIFFs, thresholds, rain checks, escalators, multipliers.

We get it. But unless your spreadsheets (or more likely, Enterprise Calcs) can process that logic don’t do it.

Scale Break Point #3:  If it can’t be calculated automatically, it creates unnecessary operational debt.

Example: A Telecom firm decided to create quarterly accelerators on top of annual performance multipliers. Their overly-complex spreadsheet model literally crashed — preventing Finance from calculating payouts. The result? Manual, simplified payouts were done by Finance leading to underpayments and expensive retroactive corrections.

4. Admin Intensive Processes 

Believe it or not, spreadsheets are still the most popular “compensation management” solution. And you know what sucks about spreadsheets? 

a. They break 

b. Versions get mixed up 

c. Someone makes a cell-comment adjustment on cell A5 that no one knows about

Scale Break Point #4: Once you reach a certain level of administrative help, manual processes fail compensation execution.

Example: As part of a routine audit, a FinTech firm discovered a formula issue in their commission spreadsheets. Renewals were not being factored into commissionable revenue for two entire quarters. To make matters worse, they owed $4.2M in back payments to sellers who felt betrayed by the error.

5. Lack of Compensation Governance 

Have you ever heard of SOX compliance? It doesn’t just apply to financial reporting — your compensation program needs controls, auditability, clear approval processes, and visibility.

I saved the worst for last. At scale, your payouts will have significant financial reporting implications.

Scale Break Point #5: Execute poorly once and you’ll forever be dealing with compensation’s impact on your organization’s finances.

Example: There are countless examples of this but… allow adjustments to be made outside of your system absolutely destroys any chance of proper governance and auditability.

C. How to Avoid Common Compensation Execution Break Points

Congrats. You know the problems. Let’s review how you can prevent compensation execution from breaking.

1. Build Around a Single Source of Truth 

Sound pretty simple right? Build your compensation foundation on integrated data flowing into a central repository. Where CRM = ERP = HR = Quota/Territory/FileXYZ. 

Once that’s built, automate how that data validates before running any calculations.

Business Impact: Fewer disputes, faster close cycles, ready for audits.

 2. Shift to Flexible Crediting Rules 

In today’s complex sales environments, crediting should be dynamic enough to handle:

a. Overlay credit hierarchy charts 

b. Partner attribution rules 

c. Multi-touch attribution 

d. Time-based deal splits 

Rule-based crediting engines are built to scale with your business.

3. Apply an Execution Feasibility Lens to Plan Design

Prevent unnecessary complexity by vetting every incentive plan through a series of questions:

a. Can the payout be easily calculated by system?

b. Are there reliable sources of data? 

c. Will your sellers even understand how they are paid?

Most plans can be simplified. The ones that can’t, often aren’t motivating anyways.

4. Automate Everything 

Wait what does “everything” mean when it comes to compensation management?

a. Automated calculations 

b. Workflow approvals 

c. Real-time analytics & dashboards 

d. Self-service dispute resolution 

Investing in an Enterprise Incentive Compensation Management platform helps streamline every aspect of execution.

 5. Build Governance into Your Processes 

Your compensation program should operate with financial system’s grade of controls.

a. Role-based access 

b. Approval hierarchy 

c. System only adjustments 

d. Complete payout auditability 

D. Benefits of Future-Proof Compensation Execution 

Look when you’ve got compensation execution figured out you start to realize benefits that go way beyond faster close cycles.

a. Predictable Comp Expense forecasting 

b. Increased seller trust & confidence 

c. Reduced Revenue Leakage 

d. Simplified reporting & compliance requirements 

Most importantly, your compensation program stops being a cost center and starts to drive revenue.

E. Conclusion

Compensation execution doesn’t break all at once. 

It starts chipping away when your company grows faster than your operating procedures can handle.

By taking a proactive approach to plan design, data governance, scalable technology, and operating with compensation execution in mind from the start you can prevent your compensation program from breaking.