Dear Calcy: (Re-)Evaluating Compensation Plan Success

Dear Calcy,

When evaluating the success of our commission plans, our team focuses on revenue results, but sometimes sales performance and actual revenue outcomes don’t always align. What metrics should finance teams track to ensure their compensation strategies are driving the intended business impact?

With gratitude,

Measuring More Meaning

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Dear Measuring More Meaning,

You’re not alone in this challenge! It’s a common frustration — on paper, sales performance looks strong, but when the finance team zooms out to the revenue picture, things don’t always add up. The key to solving this disconnect is tracking the right metrics and making sure your comp plans are designed to drive the outcomes you actually want.

Here are a few ways to ensure that your compensation strategy is aligned with revenue impact:

1. Track Attainment vs. Pay Ratio

One of the first red flags to check is whether commission payments are scaling appropriately with performance. A helpful way to measure this is by comparing OTE attainment vs. quota attainment across your sales team. If reps are earning significantly more (or less) than expected based on their revenue contributions, it may indicate an issue with accelerators, kickers, or misaligned payout structures.

2. Differentiate Between Bookings and Revenue

If your company compensates based on bookings but recognizes revenue over time, there will naturally be timing discrepancies. But if those discrepancies are consistently large or unpredictable, it may be worth reconsidering whether a portion of compensation should be tied to revenue realization. Some companies implement milestone-based payouts (ie. partial payment at booking, additional payments upon activation or renewal) to bridge the gap.

3. Measure Customer Retention & Expansion

If sales reps are over-indexed on new business commissions but revenue outcomes are underwhelming, take a closer look at retention and expansion. Are reps selling the right deals, or are aggressive front-loaded incentives leading to churn-prone customers? Tracking renewal rates, expansion revenue, and margin contribution can help determine if your comp plans need a better balance between acquisition and long-term value.

4. Identify Pipeline & Forecast Accuracy Gaps

If sales performance is strong but revenue results lag behind, pipeline forecasting may not be as accurate as it should be. Work with sales and RevOps to analyze:

• Deal slippage: Are deals closing later than expected, delaying recognized revenue?
• Discounting behavior: Are reps closing deals at deep discounts to hit quotas, impacting revenue realization?
• Product mix & margin analysis: Are the highest-commissioned products actually driving the most revenue growth?

5. Improve Data Transparency & Reporting

Misalignment between sales and finance often comes down to gaps in visibility. Ensure sales reps and finance teams have access to real-time dashboards that show not just commission earnings but also how their deals contribute to company-wide revenue goals. Educating reps on how their deals translate into revenue can help create stronger alignment between performance expectations and financial outcomes.

By focusing on these areas, finance teams can ensure that incentive compensation isn’t just rewarding sales activity, but actually driving the right kind of growth.

Onward to more robust compensation reporting!
Calcy