One commission rate on everything sold, for a full year. The reps hit quota most months, and their books looked almost exactly like the year before. Nothing on the dashboard was red, because nothing in the plan asked for growth.
Every rep was paid the same flat percentage on everything they sold. It is the plan most companies start with: simple, fair, and easy to explain in one sentence.
It ran for an entire year. Month by month, the numbers looked decent. Most reps hit quota most months. Then you compared each rep’s book with the same months a year earlier, and it was close to the same book. The accounts that bought last year bought again, the commission arrived, and the territory did not grow.
Quota hit, most months, by most reps.
Commission paid in line with the plan.
No one underperforming badly enough to talk about.
Every one of those was true. None of them measured growth, because growth was not designed into the plan or into the quota.
A young territory has no history, so everything a rep sells is growth and a flat rate pays for growth by accident. A mature territory has a book that reorders on its own. The same flat rate now pays mostly for revenue that would have arrived anyway.
And a quota set without a growth line hides it. If quota sits near last year’s number, a rep who repeats last year hits quota, and hitting quota is the only thing the monthly view checks.
Attainment is a month-against-quota number. Growth is a year-against-year number. The dashboard showed the first and never the second, so a flat year and a growing year looked identical until someone put two years side by side.
And the reps did nothing wrong. A rep sitting on a healthy book, paid the same rate whether it grows or not, is reading the plan correctly. Pushing into new accounts is harder work for the same rate. The system produced the behaviour, the same way it did in post-mortem 13, where the plan paid for volume and the bottom of the book died on schedule.
A territory that booked $1,000,000 last year, a rep with $60,000 of variable pay at target, and a coasting year that books exactly what last year did.
| Worked figures | |
|---|---|
| Flat rate, quota set at last year a coasting year hits quota | $60,000 100% of target |
| Flat rate, quota set at last year plus 20% the same year is 83% of quota | $50,000 83% of target |
| Half per deal, half on growth quota at last year plus 20% | $25,000 42% of target |
A model, not measured actuals, from the Comp Plan Designer’s own arithmetic. The flat plan pays a year with no growth in it like a good year. The growth plan pays it like what it was.
It is “is this territory bigger than it was a year ago, and did the plan pay any differently if it was not?” If the answer to the second half is no, the plan is not paying for growth, whatever the quota says.
A full year of growth that nobody asked for and nobody paid for. Commission went out at the normal rate on books that were standing still, so the company paid full price for last year’s revenue a second time.
The larger cost is the one that does not show up anywhere: the new accounts and the bigger accounts that were never opened, because opening them was harder work for the same rate. In a business that is supposed to grow, a flat year is not a neutral year. It is a year the territory fell behind, recorded as a year it hit plan.
1 · Quota built bottom-up from last year plus growth. Territory by territory, the same period last year plus a percentage, so everyone is looking at growth. Repeating last year now misses quota, and the monthly view finally shows it.
2 · Half of the variable paid on growth. Half per deal, as a hedge against a market the rep does not control, and half on growth over the same months last year, paid monthly on the year so far. A month that pulls the year back pays nothing on that half. Nothing is ever clawed back.
3 · Incentives where you want the focus. More on the first deals with the largest partners and the first deal with any new partner, a quarterly accelerator past goal, a consistency accelerator for steady months, and no cap.
A flat rate is not a neutral choice. In a mature territory it is a decision to pay for repetition, made by not making one.
Growth sped up and revenue targets were hit, because pay and the goal finally pointed the same way.
If not, your plan may be doing exactly what ours did. Start with the arithmetic: the model is free and shows what your revenue is made of, which is where the question of growth starts.
Run the model, free No account. Your numbers stay in the link.