The Rule of Thumb:
A commission plan has one job: to drive behavior. If the plan is too complex to understand, it cannot drive behavior. It becomes just a "bonus" that surprises people at the end of the month.
As finance leaders, we love nuance. We love edge cases. We love adding a "gate" here and a "kicker" there to cover every possible scenario.
But every new rule you add imposes a Cognitive Tax on your sales team.
If a rep has to open a spreadsheet to figure out if a deal is worth closing, you have lost momentum.
The most effective sales plans in the world pass the Napkin Test:
"Can a rep calculate their commission on a specific deal, on the back of a cocktail napkin, in under 30 seconds?"
If the answer is no, your plan is too complex. Here is why complexity kills sales—and how to fix it.
1. Complexity Breeds "Wait and See"
When a rep doesn't understand the payout, they don't hustle for the extra dollar. They adopt a "wait and see" attitude. They close the deal and hope the check is good.
The Cost: You lose the incentive effect. You are paying the commission, but you aren't getting the extra effort that the commission was supposed to buy.
2. The "Law of 3 Metrics"
A human brain can only optimize for a few variables at once.
The Fix: Limit your plan to maximum 3 metrics.
- Primary Metric (60-80%): Revenue / Quota (The main driver).
- Quality Metric (10-20%): Retention / Margin / Multi-Year (The guardrail).
- Strategic Metric (10-20%): New Product / New Logo (The future growth).
If you have 5 metrics, your reps will ignore the bottom 3. Cut them.
3. Replace "Gates" with "Accelerators"
We often use "Gates" to punish bad behavior (e.g., "You get 0% commission unless you hit 80% of quota").
The Fix: Flip the psychology. Use Accelerators instead.
Instead of punishing the bottom 50%, aggressively reward the top 20%.
- Bad: "No payout until $10k."
- Good: "Payout starts at $1, but doubles after $50k."
Positive reinforcement drives velocity; negative gates drive fear and paralysis.
4. How to Simplify "Legacy" Plans
If you inherited a monster plan with 15 variables, don't try to fix it all at once.
The "Red Pen" Exercise:
Print out your current plan document. Take a red pen. Cross out every clause that applied to less than 5% of deals last year.
- Did anyone actually hit the "Q3 Spiff Kicker"? No? Cut it.
- Did the "churn penalty" apply to anyone? No? Cut it.
You will be shocked at how much "dead weight" is in your plan document.
Frequently Asked Questions (FAQ)
My business is complex. Doesn't my plan need to be complex?
No. Your internal modeling can be complex, but the rep-facing plan must be simple. You can handle the complexity of margins and COGS in the background, but present the rep with a simple "10% of Gross Profit" rate.
How often should we change the plan?
Ideally, once a year. Mid-year changes destroy trust. If you must change it mid-year to fix a broken metric, treat it as a "re-launch" with full communication and a "no rep left behind" guarantee for the transition month.
Is a flat rate better than tiers?
For early-stage startups, yes. A flat 10% is the ultimate simple plan. As you scale and have historical data, Tiers (Accelerators) become better for optimizing cost-of-sales, but don't rush to them until you have the data to model them correctly.
Related Reading
Model Simplicity vs. Complexity
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