How to design a sales comp plan
Comp plan design is strategy expressed in dollars: reps do what they are paid to do. A well-designed plan channels behavior toward the company's real goals; a poorly designed one creates clever reps optimizing for the wrong thing. Design from outcomes backward.
Short answer
Design a sales comp plan by starting from the business outcomes you want, choosing metrics that reward them, setting OTE and pay mix by role, keeping the structure simple, and modeling cost of sales. Align every incentive with company strategy, avoid rewarding the wrong behavior, and test the plan before rolling it out.
Step by step
Start from desired business outcomes
Define what the company needs: new logos, expansion, multi-year deals, a specific product mix. The plan should pay most for what matters most.
Choose metrics that reward those outcomes
Pick primary and secondary measures carefully, watching for perverse incentives.
- Reward new ARR if new logos are the goal
- Add a multiplier for target products or multi-year terms
- Avoid metrics that reward discounting or sandbagging
Set OTE and pay mix by role
Differentiate by role and seniority. An SDR, an AE, and a CSM should have different mixes tied to their control over the outcome.
Keep it simple and transparent
Limit modifiers so a rep can calculate their own earnings. Simplicity drives the behavior you intend.
Model cost and test before rollout
Run the plan against historical results and attainment scenarios to check cost of sales and hunt for loopholes before it goes live.
Common mistakes
Designing the plan to be fair rather than to drive behavior. Comp is a steering wheel, not a reward for effort.
Rewarding revenue regardless of margin or discount, which trains reps to close cheap deals fast.
How Ardovo helps
Ardovo ties comp to any metric in the platform, so you can reward new ARR, margin, product mix, or term length directly. Rook models the plan against real deals to expose loopholes and confirm cost of sales before you commit.
Frequently asked questions
What is the difference between a comp plan and a commission plan?
A commission plan is the mechanics of how variable pay is calculated. A comp plan is the broader design: OTE, pay mix, metrics, accelerators, and how the whole thing aligns to strategy across roles. The commission plan is one component of comp design.
How do I avoid perverse incentives in a comp plan?
Model the plan against real scenarios and ask how a clever rep could game it. If revenue-only pay rewards discounting, add a margin component. If quarterly pay encourages sandbagging, use accelerators. Design for the behavior, then test for loopholes.
How often should I change the comp plan?
Review it annually and when strategy shifts, but avoid frequent mid-year changes that erode trust. Reps need stability to plan their selling. When you must change it, communicate the why clearly and model the impact on rep earnings first.