Compensation Plans Don’t Fail. They Work Exactly as Designed.

Compensation plans are one of the most powerful levers a company has.

And one of the most consistently misused.

Most issues with comp plans come down to one thing. They are not actually aligned to what success looks like in the role.

Sometimes that misalignment is obvious. Sometimes it is subtle. But over time, it always shows up in behavior.

One version of this is complexity.

When a comp plan has commissions, spiffs, accelerators, and bonuses tied to a dozen different activities, it becomes possible to make good money without actually delivering meaningful results. It also becomes so difficult to understand that it loses its ability to motivate. At that point, it is no longer a performance system. It is just a payout mechanism.

Another version is when the plan is too flat.

If the difference between top performers and average performers is marginal, you are not actually rewarding performance. You are rewarding participation. I have seen this done in the name of fairness. The logic is usually that everyone is working hard and external factors play a role. But the message it sends is clear. Extraordinary performance is not meaningfully different from average performance.

A third version is when important behaviors are simply not incentivized.

I saw this with an account management team that was responsible for growing existing accounts, but had no incentive tied to new business. When their contacts moved to new companies, there was no reason to follow them. A simple change to give them credit for that revenue completely changed behavior and unlocked a meaningful source of growth almost immediately.

And then there is the most dangerous version.

Paying for the wrong outcomes.

I worked at a company where the message to the sales team was “don’t be beaten on price.” It sounds good. It plays well in a kickoff. But it ignores a fundamental reality. There is business you should not win.

When you combine that message with a comp plan that rewards top-line revenue without regard to margin, you get exactly what you would expect. Aggressive discounting. Margin erosion. Deals that should never have been done.

In one case, a rep made President’s Club on a deal that cost the company close to a million dollars. He was celebrated. He was paid. And the company lost money.

That is not a sales problem. That is a system problem.

The comp plan did exactly what it was designed to do.

Finally, there is timing.

When you pay on booking but success depends on delivery, retention, or expansion, you separate the reward from the outcome that actually matters. Ownership ends at signature.

Across all of these examples, the pattern is the same.

Compensation plans do not create behavior. They amplify it.

And they will always drive people toward what is rewarded, even if that behavior is in direct conflict with what the company says it wants.

If you want different outcomes, you do not start by rewriting the messaging.

You start by fixing the system.