Most companies invest significant time and money designing sales incentives plans.
The assumption is simple:
If you reward the right behaviours, sales performance will improve.
But what happens when the opposite occurs?
What happens when your incentives plan starts encouraging the wrong behaviours, frustrating top performers, increasing costs, or even damaging customer relationships?
The uncomfortable reality is that many organisations have sales incentives plans that are not working as intended.
And often, they don’t realise it until the damage has already been done.
3 Key Takeaways
✅ A poorly designed sales incentives plan can actively damage performance, profitability, and employee retention.
✅ The biggest problem is often not the incentive itself, but the behaviours it unintentionally encourages.
✅ Regular analysis, clear communication, and alignment with business objectives are essential to keeping incentives effective.
Invest in yourself by buying my book HERE to learn how to design the most effective sales incentive program for your salesforce.
If you’re looking to grow your sales and build stronger client relationships, take a look at how I help teams like yours — and feel free to reach out for a chat.
Why Do Sales Incentives Matter So Much?
Sales incentives are one of the most powerful levers available to sales leadership.
They influence:
- What salespeople prioritise
- How they spend their time
- Which customers they pursue
- Which products they promote
- How they behave throughout the sales cycle
Research from the Incentive Research Foundation found that properly designed incentive programmes can improve performance by 22% on average, while team-based incentives can improve performance by as much as 44%.
In addition, research highlighted by McKinsey found that improvements to sales compensation models can have a greater impact on sales performance than increased advertising investment.
That is why getting incentives right matters.
What Is An Ineffective Sales Incentives Plan?
An ineffective sales incentives plan is a plan that fails to achieve the business outcomes it was designed for.
In some cases, it produces no meaningful impact.
In worse cases, it encourages behaviours that hurt the organisation.
An ineffective plan often creates a disconnect between:
- What the company wants
- What salespeople are rewarded for
- What customers actually need
The result?
Salespeople optimise for incentives instead of business success.
How Can You Tell If Your Sales Incentives Plan Is Not Working?
There are usually warning signs.
1. Salespeople Do Not Understand How They Are Paid
If people cannot clearly explain:
- How commissions are calculated
- What behaviours are rewarded
- How they can maximise earnings
then the plan is already failing.
Complexity destroys motivation.
2. Top Performers Are Frustrated
One of the most common signs is when high performers feel the effort they put in is not reflected in their compensation.
This often leads to:
- Disengagement
- Reduced productivity
- Higher employee turnover
3. Incentive Payments Are Frequently Disputed
If finance and sales spend significant time resolving commission disputes, this usually points to:
- Poor plan design
- Lack of transparency
- Operational issues
4. The Wrong Products Are Being Sold
Sometimes incentives unintentionally encourage salespeople to focus on products that pay higher commissions rather than products that best serve customers.
This creates:
- Revenue imbalance
- Margin pressure
- Customer dissatisfaction
5. Business Objectives Are Not Being Achieved
Perhaps the strongest indicator.
Ask yourself:
Did the plan achieve the objectives it was created for?
For example:
- Want more new customers?
- Want higher margins?
- Want more cross-selling?
- Want more recurring revenue?
If these outcomes are not improving, the plan needs review.
I’ve just finished writing something new and insightful—and I think you’ll find it valuable. I wanted to offer it to you first.
FREE Guide – Sales Compensation and Sales Incentives: Click HERE
What Risks Does A Poor Sales Incentives Plan Create?
The consequences can be significant.
Risk #1: Increased Employee Turnover
Top salespeople are highly sensitive to compensation.
When they believe the plan is unfair, confusing, or limits earnings potential, they leave.
Replacing experienced salespeople is expensive and disruptive.
Risk #2: Rising Cost Of Sales
An ineffective incentives plan can create a situation where commission costs increase without a corresponding increase in revenue or profitability.
This means:
- Higher compensation costs
- Lower margins
- Reduced return on investment
Risk #3: Unintended Sales Behaviours
Poor incentives can encourage behaviours such as:
- Selling at unnecessary discounts
- Prioritising short-term wins
- Chasing low-quality opportunities
- Retaining unprofitable accounts
- Ignoring strategic products
The sales team follows the incentive.
Not necessarily the strategy.
How Should You Analyse The Effectiveness Of Your Incentives Plan?
Many companies launch a plan and rarely review it.
That is a mistake.
Here are five important analyses every organisation should perform.
1. Compare Incentive Costs Against Revenue And Profit
Ask:
- How much was paid?
- What revenue was generated?
- What profit was generated?
The goal is to understand the return on incentive investment.
2. Analyse Incentive Distribution
Review who receives incentives.
Questions worth asking:
- Are rewards concentrated among a few individuals?
- Are most people missing targets?
- Is there fairness across teams?
3. Monitor Earnings Trends
Track how earnings evolve over time.
This helps identify:
- Motivation issues
- Retention risks
- Structural weaknesses in the plan
4. Measure Quota Attainment
A useful indicator is the percentage of salespeople achieving target.
If almost nobody reaches target:
- Targets may be unrealistic
If everybody reaches target:
- Targets may be too easy
Neither scenario is ideal.
5. Analyse Behavioural Outcomes
Review whether incentives are driving the intended actions.
For example:
- More new customers?
- Higher average deal size?
- Better margins?
- More cross-selling?
If not, the incentive plan may be rewarding the wrong behaviours.
How Can You Fix An Ineffective Sales Incentives Plan?
There is no universal formula.
However, there are several proven principles.
Step 1: Start With Business Objectives
Before discussing commissions, bonuses, or accelerators, ask:
What business outcomes are we trying to achieve?
Compensation should support strategy.
Not replace it.
Step 2: Build A Cross-Functional Governance Team
The best plans involve multiple stakeholders.
Typically:
- Sales
- Finance
- HR
- Operations
- Analytics
Each group brings a different perspective.
Step 3: Simplify Wherever Possible
One of the biggest mistakes organisations make is overengineering incentives.
Simple plans are easier to:
- Understand
- Trust
- Administer
- Scale
Step 4: Communicate Clearly
Never assume salespeople understand the plan.
Explain:
- Why changes are being made
- What behaviours are rewarded
- How earnings are calculated
Transparency builds trust.
Step 5: Review Regularly
Business priorities change.
Markets change.
Products change.
Your incentives plan should evolve as well.
Conduct periodic reviews to ensure alignment remains intact.
Final Thoughts
Over the years, I have seen organisations spend enormous amounts of effort building sales strategies, GTM plans, CRM systems, and sales processes.
Yet surprisingly little time is spent evaluating whether the incentives plan is actually driving the desired behaviour.
The reality is simple:
Salespeople do what they are rewarded to do.
If the incentives plan is not aligned with business goals, even the best sales team will eventually move in the wrong direction.
The good news is that most incentive problems are fixable.
The key is identifying them early, measuring their impact, and having the discipline to make adjustments before they become costly.
Useful Resources
- McKinsey: Sales Incentives That Boost Growth
- Incentive Research Foundation: Incentives, Motivation and Workplace Performance
- Sales Management Association Research on Compensation Effectiveness
- WorldatWork: Pay-for-Performance Compensation
Frequently Asked Questions
How often should a sales incentives plan be reviewed?
At minimum annually. However, organisations operating in fast-changing markets should review key metrics quarterly to ensure incentives remain aligned with business goals.
What is the biggest mistake companies make when designing incentives?
Rewarding outcomes without considering the behaviours required to achieve them. This often creates unintended consequences and misalignment with strategy.
Should incentives focus only on revenue?
Not necessarily. Many organisations successfully include metrics such as profitability, customer retention, product mix, customer satisfaction, cross-selling, and strategic initiatives to create more balanced performance.
FREE Ebook – Choose the right sales compensation plan: Click HERE
If you’d like to receive more insights like this and be part of a small group I email from time to time, just sign up using this link.
In case you are looking to grow your business, I am here with you. Fill up THIS form and let’s talk.
