Your sales compensation strategy may be working against your business objectives.
Companies spend considerable time developing sales strategies. They establish revenue targets, introduce new products, identify growth opportunities, and communicate their priorities to the sales organization.
Then they send their salespeople into the field with the same compensation plan they've been using for years.
It's a surprisingly common disconnect.
Leadership communicates one set of priorities, while the compensation plan rewards something entirely different.
And when that happens, it's usually the compensation plan that wins.
Salespeople understand that their job is to generate revenue. They also understand how they're paid. When deciding where to invest their limited time and energy, compensation naturally influences which opportunities receive the most attention.
If you want to change what your salespeople prioritize, take a close look at what you're paying them to accomplish.
1. New Product Priorities, Old Compensation Plans
Imagine a technology company preparing to launch an important new product line.
The company has invested heavily in development, inventory, marketing, and training. Leadership believes the new offering will become a significant contributor to future revenue.
Sales meetings emphasize the product's importance. Managers encourage their teams to introduce it to customers. Marketing launches campaigns to generate interest.
But the compensation plan remains unchanged.
Salespeople earn the same commission percentage whether they sell the established product they've represented for years or the new offering that requires additional training, longer customer conversations, and potentially more effort to close.
What happens?
Many salespeople continue concentrating on the products they already know how to sell.
It's not necessarily because they disagree with the company's strategy. They're making a rational decision about where their time produces the most predictable financial return.
The new product may be strategically important to the company, but the compensation plan hasn't made it particularly important to the salesperson.
A new product launch without an aligned compensation strategy can leave the sales organization financially motivated to maintain the status quo.
A temporary commission accelerator, product-specific bonus, or launch incentive can help redirect attention during the critical introduction period.
The goal isn't to permanently overpay for the new product. It's to recognize the additional effort required to establish it in the market.
2. You Want New Customers, but You're Paying for Existing Business
Customer acquisition is another area where compensation plans frequently conflict with business objectives.
Consider a company that wants to expand its customer base.
Leadership sets aggressive new-account acquisition targets and asks salespeople to increase prospecting activity.
However, the compensation plan pays the same commission on revenue from established customers as it does on revenue from newly acquired accounts.
For an experienced salesperson with a substantial existing customer base, the decision can be straightforward.
Why spend weeks prospecting, developing relationships, and competing for a new customer when an established account can generate a similar commission with significantly less effort?
Existing customers deserve attention, and maintaining those relationships is important. But acquiring new customers generally requires different activities and often greater initial effort.
If customer acquisition is a strategic priority, the compensation model should reflect that.
Companies might consider higher commissions for first-time customers, bonuses tied to new-account activation, or separate incentives for acquiring customers in targeted industries.
The key is recognizing that maintaining existing revenue and creating new revenue are different contributions, and they don't always deserve identical compensation.
3. The Initial Sale Is Just the Beginning. Are You Rewarding What Comes Next?
For many technology companies, the initial product sale represents only a portion of the potential customer relationship.
A customer purchasing hardware may subsequently need software licenses, accessories, deployment services, maintenance, security solutions, or additional devices.
These opportunities can generate meaningful incremental revenue and, in some cases, higher margins than the original transaction.
Yet many compensation plans place most of their emphasis on the initial sale.
Once the transaction closes, the salesperson moves on to the next opportunity.
The company may have invested considerable resources acquiring the customer, only to leave future revenue opportunities largely dependent on the customer's initiative.
Consider a salesperson who closes a $100,000 hardware transaction.
Over the following year, that customer could purchase another $30,000 in software, services, and accessories.
But if the salesperson receives little or no compensation for developing those additional opportunities, how much effort should leadership realistically expect them to invest?
The solution may be to reward incremental revenue generated after the initial transaction.
That could include commissions on additional product purchases, incentives for attaching software or service contracts, or bonuses for expanding the customer's adoption of the company's broader portfolio.
For recurring services, compensation can also recognize the value of establishing long-term customer relationships rather than focusing exclusively on the first transaction.
Of course, account ownership and compensation responsibilities must be clearly defined, particularly when account managers, customer success teams, and sales specialists share responsibility for the customer.
Acquiring a customer creates an opportunity. Expanding the relationship is how companies capture more of its potential value.
A well-designed compensation plan should encourage both.
4. Revenue Is Growing, but Profitability Isn't
Not all revenue contributes equally to a company's financial performance.
Some products generate attractive margins. Others produce relatively little profit after discounts, incentives, fulfillment expenses, and support costs.
Yet many organizations compensate salespeople primarily on gross revenue.
Consider two opportunities:
A salesperson closes a $200,000 transaction generating a 10% gross margin.
Another closes a $150,000 transaction generating a 30% gross margin.
The first transaction produces $20,000 in gross profit. The second produces $45,000.
If commissions are calculated solely on revenue, the salesperson responsible for the less profitable transaction may receive the larger payment.
From the company's perspective, that's not necessarily the desired outcome.
This becomes particularly problematic when salespeople have significant pricing discretion.
A compensation model focused entirely on revenue can unintentionally encourage excessive discounting, especially when salespeople are trying to meet quarterly targets.
Companies seeking to improve profitability should consider whether gross-profit-based commissions, margin thresholds, or incentives for maintaining pricing discipline would better support their objectives.
These models require careful design. Salespeople should be measured on financial outcomes they can reasonably influence, rather than costs or accounting adjustments outside their control.
If profitability is a strategic priority, a compensation plan that ignores profitability deserves a second look.
5. You Want Team Selling, but Your Compensation Plan Encourages Competition
Modern B2B sales frequently require collaboration.
An account executive may identify the opportunity, a product specialist may develop the solution, and a channel manager may help coordinate a reseller or technology partner.
Together, they win the business.
But what happens when the compensation plan only rewards one individual?
Salespeople may become reluctant to involve colleagues if doing so means sharing commissions or losing credit for the transaction.
Territory disputes can emerge. Account ownership becomes contentious. Internal teams begin competing for recognition rather than cooperating to win business.
The organization may talk extensively about collaboration while maintaining a compensation structure that discourages it.
This doesn't mean every contributor should receive an equal commission.
It means compensation policies should recognize how the organization actually sells.
Clearly defined split-credit rules, specialist incentives, team-based performance components, and channel participation policies can reduce internal friction.
The objective is to make collaboration financially sensible rather than something salespeople feel they're being asked to do at their own expense.
6. You Want Predictable Revenue, but You Only Reward One-Time Transactions
Many technology companies are expanding beyond traditional product sales into subscription services, software licensing, managed services, and recurring support agreements.
Leadership values these revenue streams because they can create more predictable revenue and longer customer relationships.
But compensation plans developed for one-time hardware transactions may not encourage salespeople to pursue them.
A salesperson might earn a substantial commission for a single hardware purchase while receiving relatively little recognition for securing a multiyear service agreement.
The hardware sale delivers an immediate commission. The recurring service may require additional customer education, contract negotiations, and ongoing coordination.
If the financial reward doesn't reflect that effort, salespeople may continue prioritizing one-time transactions.
Companies transitioning toward recurring revenue should evaluate incentives for new recurring contracts, multiyear commitments, and expansion of existing subscriptions.
They should also establish clear rules regarding renewals, cancellations, and customer retention.
The compensation structure needs to support the business model the company is building, not simply the one it operated in the past.
7. Compensation Plans Should Evolve With the Business
One of the challenges with sales compensation is that companies often treat it as an annual administrative exercise rather than an ongoing strategic tool.
Plans are reviewed, quotas are adjusted, commission rates are approved, and the organization moves forward.
Meanwhile, business priorities continue changing.
New products are introduced. Customer segments evolve. Profitability expectations shift. New sales channels emerge. Subscription offerings become more important.
A compensation plan that worked well three years ago may no longer support the company's current strategy.
That doesn't mean compensation structures should change every quarter.
Frequent changes can create uncertainty, undermine trust, and make it difficult for salespeople to plan their income.
Instead, companies should periodically examine whether their compensation plans still encourage the behaviors necessary to achieve their objectives.
Some useful questions include:
- Are we providing meaningful incentives for strategically important new products?
- Are we appropriately rewarding new customer acquisition?
- Do salespeople benefit from expanding existing customer relationships through additional products and services?
- Are our compensation plans encouraging profitable revenue?
- Does the plan reward collaboration or create unnecessary internal competition?
- Are we properly incentivizing recurring revenue and long-term customer value?
- Can our salespeople clearly understand how their activities translate into compensation?
The answers can reveal significant opportunities to improve performance without adding sales headcount or increasing overall compensation expense.
The Bottom Line
Sales compensation is much more than a method for calculating commissions.
It's one of the most direct ways a company communicates its business priorities to the people responsible for generating revenue.
Salespeople pay attention to leadership's direction. They listen when new products are introduced, growth targets are announced, and strategic initiatives are launched.
But they also pay close attention to their compensation plans.
When those two messages conflict, companies shouldn't be surprised when salespeople prioritize the activities that produce the greatest personal financial return.
The solution isn't necessarily to pay salespeople more.
It's to make sure the compensation dollars you're already spending encourage the behaviors and outcomes your business needs.
Your business strategy tells your salespeople where the company wants to go. Your compensation plan gives them a financial reason to help get there.
Make sure they're pointing in the same direction.