The Comp Plan Makeover Your Revenue Team Desperately Needs
"You know what drives me crazy,” asked Ryan Milligan, VP of Sales, Marketing, and RevOps at QuotaPath. “When I see comp plans totally disconnected from what the business actually needs to succeed."
Unfortunately, those are exactly the types of compensation plans most CROs inherit. They’re overly complicated, siloed, and incentivize short-term gains over long-term growth.
“SDRs get paid for demos, AEs for closed deals, and CS for retention,” explained Milligan. “The second they move an opportunity to closed won or book a demo, they receive their commission and it doesn't matter what happens next. Nobody's looking at the big picture.”
A good comp plan is about more than a paycheck. It’s a strategic lever for growth.
But how do you rework your plan in a way that actually helps drive efficiency, improve retention, and meet quota?
Milligan has a few ideas on how to give your comp plan a facelift.
1. Find Your North Star Metric
"First assess what's the major metric that the business has to move in order to be successful this year, Milligan said. “If your company needs to expand into enterprise, you need to raise your ACV. If retention is an issue, every GTM function must be incentivized to improve GRR.”
If your company needs to expand into enterprise, you need to raise your ACV. If retention is an issue, every GTM function must be incentivized to improve GRR.
Once you determine your North Star metric, you can work backward to the activities that drive your desired result. Those are the activities you want to incentivize through your compensation structure.
2. Drive Real-Time Behavior
A good comp plan drives real-time behavior. It shouldn’t be an after-the-fact spreadsheet calculation.
That means your reps need to see the impact immediately. Milligan likes to use accelerators to drive the right behaviors from his team.
"The problem is that oftentimes an AE will discount a two-year deal more than the bump in commission rate,” Milligan said. “You have to make the rate accelerated enough so that it really changes behavior.”
Finding the right rate of acceleration can be tricky, but you have to be willing to experiment to find out what works (more on that below). And while it’s no secret salespeople are money-motivated, that’s not the only tool in your arsenal.
An underrated way to get buy-in from your reps? Transparency.
"You have to be very transparent with what the business cares about,” Milligan said. “Tell them ‘Our goal is to improve our gross revenue retention and here's how.’”
Your team cares about the success of your business. After all, it impacts them, too. If you openly share what drives revenue and why, it will be easier for them to understand their role in making it happen.
3. Test What Actually Works
Now it’s time to test what types of compensation work best.
“You're basically just testing the price elasticity or the rate bump elasticity,” Milligan explained. “You want to find what bump in rate is high enough to drive a change of behavior [but] low enough to be cost-defined for the business."
You want to find what bump in rate is high enough to drive a change of behavior [but] low enough to be cost-defined for the business.
QuotaPath found that most of their reps still favored one-year deals because discounts on multi-year deals made the commission gain negligible.
So Milligan ran a bold experiment. For one quarter, he dramatically increased the commission rate to 22% for two-year deals.
He was clear with his team that this was temporary: "We're running an experiment to see if we can change your behavior."
In addition to the rate change, Milligan and his team stopped offering one-year deals in their sales conversations, keeping the attention on multi-year contracts.
The result? QuotaPath went from 15% of contracts being multi-year to a whopping 85%. Not to mention reduced churn, better product adoption, and improved revenue forecasting.
After proving the concept worked, Milligan fine-tuned the commission rate to find the sweet spot between motivation and cost-effectiveness. And it’s still working.
4. Bring CS and AM Teams into the Mix
Old-school comp plans were created for sales teams. But as lines between departments blur and customer success plays a bigger role in driving revenue, compensation plans need to keep up.
“Account managers and CSMs should all be variable compensated,” Milligan said. “They're revenue-facing teams. There's no reason they shouldn't be on a variable comp plan. I like the plan to be 70-80% GRR based.”
Account managers and CSMs should all be variable compensated. I like the plan to be 70-80% GRR based.
Post-sales drivers can include accelerators for converting a one-year contract to a two-year deal, early renewal, or significant upsells or cross-sells.
5. Make Comp Plans Visible and Motivating
One of the best things you can do, according to Milligan, is use a commission tool that gives reps visibility into what they’ll earn on every deal. That way, they know exactly what will drive growth for the business and their personal bank accounts.
Leaderboards are a good motivator, too. You can design ones specifically to show who has sold the most multi-year deals, whose deals have the highest ACV, or whatever you determined to be your North Star.
But in order for your comp plan to motivate your team, the reward needs to be something the team truly cares about. Traditional tactics like President’s Club might not work anymore. And pizza parties will definitely not cut it.
"Would your reps rather have the cash you spent on them for a President's Club trip,” Milligan asked. “Or, are they the type of people who do want to celebrate on a trip with their team?"
Take a Look in the Mirror
What it comes down to is you shouldn’t be paying commissions just to pay commissions. They are a reward for pushing revenue in the right direction. If you build your comp plans accordingly, they will drive business impact, not be a drain on your resources.
Take QuotaPath’s multi-year deal pilot as an example. Customers expect ROI from software faster than ever. If they don’t see the value, they would rather walk than try to make it work. So QuotaPath identified multi-year deals as a way to address both customer needs and business needs. Then, they designed a comp plan to support it.
“If you're on a 12-month contract and you just spend four months of it in implementation... you're probably not gonna renew,” Milligan said. “But if you're four months in and then you have 20 months to go, that becomes like a whole different adoption curve."
It’s all about knowing which levers to pull to make a real difference in your business.
Is Your Comp Plan Driving Results?
Your compensation plan should be one of your most powerful strategic tools—not just a quarterly Excel exercise that everyone dreads.
"If the comp plan isn't sitting on their shoulder being like, 'sell that as a two-year deal, not a one-year deal'... it's not actually driving their behavior,” Milligan said. “And at that point, the question becomes why even have it?"
The most successful companies are treating compensation as a real-time performance driver rather than an afterthought. They're identifying their critical business metrics, designing comp plans that align every role with those objectives, and giving their teams the visibility and motivation to change their behavior.
It's time to ask yourself: Is your compensation plan driving the results your business actually needs? Or is it time to reimagine how you motivate your team?
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