5 Ways Leading Teams Are Approaching Incentive Compensation Management in 2025

Compensation leaders today are facing a new set of demands: do more with less, move faster, and still motivate performance in a volatile market. And increasingly, they’re turning to smarter, more strategic incentive compensation as a solution.

According to CaptivateIQ’s 2025 State of Incentive Compensation Management Report, companies that treat incentive comp as a growth driver — not just an operational task — are outpacing the rest. Here's how the most forward-thinking teams are changing the game.

1. Aligning Incentives to Business Strategy — Not Just Sales Goals

Compensation has long been used to motivate individual performance – but in today’s environment, that’s no longer enough. The most effective incentive programs are designed to serve broader strategic objectives, from customer expansion and margin protection to entry into new markets. Nearly 60% of companies say they’re using incentives to fuel growth, but only a fraction are connecting those incentives to the specific outcomes the business cares most about.

But that’s starting to shift.

Seventy-two percent of companies plan to expand incentive compensation to new functions and roles, applying it to teams including customer success, marketing, and support. In addition, more organizations are incentivizing on less obvious metrics, such as team-based performance, NRR (Net Revenue Retention), and even product adoption, modernizing comp design to reflect how go-to-market teams actually operate.

When incentives mirror business strategy, the result isn’t just better alignment. It’s measurable impact.

How you can get ahead: Broaden your horizons with incentive design. Think about how you can expand your program to more effectively motivate results beyond traditional sales roles, use cross-functional metrics that reflect business priorities, and make sure your comp strategy evolves alongside company goals.

2. Automating Manual Work to Unlock Scale

Manual compensation processes continue to eat away at time, accuracy, and agility. On average, comp teams are spending 89 hours each month on tasks like commission calculations, payout approvals, and fixing errors. That’s time not spent analyzing performance, optimizing plans, or driving strategic improvements. Nearly half of all companies surveyed reported both overpaying and underpaying commissions in the past year — often a direct result of those same manual gaps.

Despite the cost, only 27% of organizations have fully automated their commissions process. Without that foundation, scaling becomes risky and slow. These inefficiencies don’t just delay payments — they chip away at trust, tie up comp teams, and limit the organization’s ability to respond to shifting conditions. Automation is no longer a nice-to-have; it’s a requirement for speed, accuracy, and impact.

How you can get ahead: Identify high-friction areas such as calculations and approvals, automate where accuracy matters most, and invest in infrastructure that can scale with your business instead of slowing it down.

3. Turning to AI for Clarity and Speed

AI has moved beyond buzzword status in most functions – and that includes incentive compensation management. Today, 71% of companies are already using AI in their workflows, with top applications focused on automating manual tasks, generating insights from reports, and improving real-time visibility for reps. These tools are helping comp teams move faster, spot performance gaps earlier, and reduce the time spent chasing down answers or modeling changes manually.

What sets high performers apart isn’t just their adoption of AI, however — it’s how they’re using it.

From forecasting earnings to answering rep questions at scale, AI is acting as a force multiplier, not a replacement. It’s giving compensation leaders the visibility and control they need to operate strategically, while also improving transparency and trust for the teams they support.

The result is a smarter, faster, and more aligned comp management process.

How you can get ahead: Integrate AI into your workflows where speed and insight matter most. Focus on use cases that improve decision-making, forecasting, and communication across the board.

4. Prioritizing Visibility to Build Trust and Drive Performance

Incentive compensation only works if people understand it — but too many teams are still flying blind. Just 50% of companies provide real-time visibility into earnings, leaving reps in the dark about how they’re tracking. That lack of clarity leads to disengagement, shadow accounting, and a constant flood of rep questions every pay period — all of which pull compensation teams further from strategic work.

Top-performing companies are reversing that trend with transparent, real-time dashboards and clear, consistent communication. They’re giving reps the visibility they need to stay focused and motivated, while also reducing the time teams spend answering one-off inquiries. It’s a better experience for sellers, and a smarter way to operate.

How you can get ahead: Make visibility a priority by equipping reps with real-time access to earnings, standardizing communication, and reducing the noise that slows down performance on both sides.

5. Managing Incentive Comp Continuously Instead of Treating It as a One-Time Event

Many organizations still treat comp planning as a static, once-a-year process – but the pace of doing business across industries today doesn’t allow for that kind of rigidity. Product launches, GTM shifts, and evolving customer needs require teams revisit and adjust compensation plans more frequently — and the data shows why. Companies that review and adjust plans weekly see more than 3x the revenue growth of those that update them annually.

Frequent optimization helps teams maintain alignment as business priorities evolve. The most effective teams have built compensation flexibility into their operating rhythm — reviewing performance consistently, acting on insights quickly, and ensuring incentive plans reflect the realities of the market.

How you can get ahead: Treat plan optimization as a regular discipline – build in review cadences, use agile tools that make adjustments easy, and align with stakeholders to ensure plan changes are seen as strategic instead of disruptive.

ICM in 2025: Evolving from Administrative Burden to Strategic Engine

Incentive compensation is no longer just a back-office process. It’s a critical lever for efficient, scalable growth — and it’s undergoing a transformation. The most effective teams are shedding outdated systems, rethinking plan design, and embracing the tools and practices that turn compensation into a true driver of performance.

What’s clear from this year’s report is that those who modernize now — with automation, AI, and aligned incentive strategies — will be best positioned to navigate uncertainty, motivate teams, and drive long-term success.