Sample frameDay 351·Sales · Compensation

Good morning. Nobody reads your strategy deck twice. Everybody reads the comp plan monthly.

Sales.

Pay Mix and the Quota

5 min read·Apply by lunch

The question

Can you look at the plan your sellers are paid under and name, dial by dial, the behaviour each setting was chosen to buy — the base-to-variable split, the number, the rate above it, the ceiling? They worked it out in their first fortnight, and they've been optimising against it ever since.

The idea

Zoltners, Sinha and Lorimer, whose credentials you met earlier in this elective, wrote the standard reference on the subject: The Complete Guide to Sales Force Incentive Compensation (2006). It treats a pay plan the way an engineer treats a machine — not as a reward for good work, but as a set of instructions your sales force will read far more carefully than anything you say out loud. Four settings do most of that talking. The base-to-variable split decides how much of the outcome you're claiming the seller personally causes. The quota decides where effort officially starts counting. The accelerator decides whether the year continues once the number is hit. And the cap decides the date your best seller stops selling. Each one is a sentence about behaviour, whether or not anybody wrote it as one. Day 110 already covered why a plan goes silent — effort has to produce the result, the result has to produce the reward, and the reward has to be worth having to that particular person — so this morning stays on the machinery rather than the motivation. The trap is designing the plan as a budget, total cost divided by heads, and then being surprised that the team farms the easy accounts, sandbags December and stops the week the accelerator runs out.

The framework

01
Set the mix by how much of the sale is genuinely theirs.
The first dial is the ratio of salary to variable pay, and the test is causal: how much of this sale happens without this person? Where the brand pulls, the product demonstrates itself and four people close the deal over nine months, a heavy commission pays somebody for the weather. Where a rep opens a cold territory and carries the internal case alone, salary alone pays for the visible half of the job. Set the split by how far one person moves it, then leave it alone for a year — a mix that shifts every quarter reads as a pay cut, and it doesn't matter what the arithmetic says.
02
Where the number came from decides whether anyone believes it.
The quota breaks more plans than any other dial, because it's built from what the company needs divided by heads and then handed down as though it were a measurement. Build it the other way: from the territory upwards, using the installed base, what the patch actually did last year, and what was won and lost inside it. Then show the seller the arithmetic. A number they can rebuild gets argued about once; a number handed down gets discounted quietly, all year, and you won't hear about it until the December forecast lands.
03
What is the accelerator actually buying?
Above the number the rate should step up rather than stay flat, and the reason is arithmetic rather than generosity: the territory is already covered and the manager already paid, so the marginal deal is the cheapest revenue you'll sell all year. A flat rate tells a seller heading for a hundred and ten per cent that the last ten pays the same as the first, which isn't a message about effort; it's a standing invitation to park two deals in the drawer until January. Look at what your team closes in the opening week of a quarter and you'll see how many were finished a fortnight earlier.
04
The cap, and the date it tells your best seller to stop.
A ceiling exists to stop a windfall — a merger, a government order, a rate rise nobody in the field caused — from paying one person more than the regional director. That's a real risk, and there are honest ways to hold it: a windfall clause on the specific deal, a review of anything outsized, or a better quota next year. What a blanket cap does instead is name a date, and your strongest seller finds it inside a fortnight. Everything after it goes into the drawer, and the person you'd least like to demotivate spends the last quarter travelling, coaching, or quietly interviewing.

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