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Sales compensation governance ensures fair, transparent, and goal-aligned incentive programs while maintaining compliance. Many companies struggle with complex plans, unclear structures, and data silos, leading to inefficiencies and disputes. For industries like finance and SaaS, where compensation can represent 5-10% of revenue, strong governance is critical.
Key takeaways:
A well-governed plan aligns sales efforts with business goals, controls costs, and boosts team performance. For SaaS and finance companies, this balance can drive growth and reduce risks.
Creating an effective governance structure for sales compensation means bringing together key players from Finance, Sales, HR, IT, and Legal. This collaboration connects strategic planning with day-to-day execution, ensuring compliance while remaining adaptable.
A strong governance structure relies on input from various departments, each playing a unique role in shaping and managing sales compensation programs.
Sales leadership takes charge of aligning compensation strategies with business goals. They know what motivates their teams and how compensation impacts performance. Their insights into market trends, competitive pressures, and quota realities are invaluable.
Finance ensures the numbers add up. They manage budgets, forecasts, and the financial modeling needed to evaluate different compensation plans. Their role is to ensure plans stay within budget and avoid unexpected costs.
HR focuses on fairness, compliance, and employee retention. They bring expertise in employment laws, benefits, and workforce management. HR also helps resolve disputes and ensures compensation supports broader talent strategies.
Legal ensures everything is above board. From navigating complex regulations to managing contracts, their oversight is critical, especially in industries with strict regulatory requirements.
Revenue Operations (RevOps) designs and administers compensation plans. They manage the systems, data, and reporting that keep these programs running smoothly. RevOps also ensures the accuracy of calculations and reporting.
"More important than the hierarchical ownership of this impactful program is the cross-functional collaboration and teamwork. A successful sales compensation owner needs to consider and weigh your organization's different points of view and priorities."
Collaboration among these teams is essential. While each department has its own priorities, finding shared goals and working together ensures the program's success.
A Sales Compensation Committee can serve as the backbone of governance, aligning stakeholders and enabling informed, data-driven decisions. This committee oversees everything from plan design to resolving disputes.
To be effective, the committee should have a clear purpose and include representatives from multiple departments. A well-defined charter outlines its goals, authority, and decision-making processes. Without this structure, the committee risks becoming a discussion group rather than a decision-making body.
Who should be on the committee? Senior leaders from Sales, Customer Success, Marketing, and Finance are key participants. The group should be small - usually 5-7 members - to ensure efficient decision-making, with clear voting procedures in place.
How should issues be escalated? Establish clear guidelines for what gets escalated, who handles it, and how. For instance, RevOps might handle individual quota disputes, while changes to commission structures go to the full committee. This approach keeps minor issues from bogging down the committee while ensuring major concerns are addressed.
The committee should also have a system for gathering feedback. A repository for suggestions allows sales teams and other stakeholders to propose improvements, creating a pipeline for refining compensation plans.
Getting buy-in from all departments is critical. Committee members must understand their individual responsibilities and how their work supports the organization’s broader objectives.
Once the committee sets the strategy, specialized teams bring it to life. These teams typically fall into three categories: steering, design, and implementation.
Steering teams focus on strategy and big-picture decisions. They define the overall direction of compensation plans and ensure alignment with business goals. Members are usually senior executives with the authority to make key decisions.
Design teams handle the details. They create the actual compensation plans, including commission structures, quotas, and performance metrics. This team often includes experts from Finance, RevOps, and Sales Operations who understand the technical aspects of compensation modeling.
Implementation teams ensure the plans work in practice. They manage system configurations, data integrity, and the day-to-day administration of plans. These teams typically include IT professionals, RevOps specialists, and HR administrators.
Collaboration between these groups is essential. Regular communication ensures plans are both practical and effective. For example, a global SaaS company once discovered that bonus accelerators were pushing payouts to 150% of target for a quota of just 105%. This misalignment went unnoticed because the design team didn’t fully understand how the plan would play out in the real world. Better communication between design and implementation teams could have prevented the issue.
For companies in industries like finance and SaaS, bringing in experienced consultants can help avoid common mistakes. Visora (https://visora.co) specializes in helping B2B businesses create governance frameworks that support effective sales compensation programs.
The key to strong governance is involving the right people in the right roles. Once the structure is set, the next step is leveraging data to continuously refine and improve your compensation plans.
Effective governance thrives on consistent measurement and thoughtful refinement. Without clear metrics and regular evaluations, even the most well-crafted plans can lose direction.
The backbone of any data-driven compensation program is selecting the right metrics. On average, companies track 5.4 KPIs for sales commissions, but it’s crucial to focus on metrics that directly align with your business goals.
Start with four key metrics:
In addition to these, tracking behavioral metrics like sales cycle length and deal size can uncover unintended consequences of your compensation plan. For instance, if your average sales cycle jumps from 45 to 70 days after introducing a new accelerator, it might signal that reps are delaying deals to qualify for higher payouts.
"On the selection of KPIs to determine commission, you really have to focus on simplicity and clarity. Otherwise, the employee doesn't know what to focus on to achieve his objectives." - Aude Cadiot, Revenue Operations Lead at Spendesk
Don’t ignore qualitative metrics like plan comprehension and rep satisfaction. A quick survey might reveal that only 50% of your team understands how their SPIFs work, leading to disengagement and inconsistent performance. Similarly, time to productivity for new hires is critical. If new reps take nine months to hit quota in a system designed for six, there may be gaps in onboarding or expectations.
Keep your metrics SMART (specific, measurable, achievable, relevant, and timely). Avoid overloading your team with too many KPIs - stick to the ones that deliver actionable insights and directly impact your goals.
These metrics form the foundation for ongoing performance evaluations, which we’ll explore in the next section on quarterly reviews.
Quarterly reviews provide a structured way to assess both sales team performance and the effectiveness of your compensation plan. Companies that set quarterly sales performance goals see 31% higher returns compared to those relying on annual reviews.
Start with key questions. Identify what’s working well in your current compensation structure. Then, tackle challenges head-on. For instance, if commission variance is too wide - some reps earning $30K monthly while others earn $3K on similar quotas - it could indicate issues with territory fairness or inconsistent SPIF usage. Such disparities can erode trust and morale.
Focus on actionable improvements. Use these reviews to pinpoint bottlenecks in your sales process or compensation design. For example, if certain incentives are misaligned with desired behaviors, collaborate with sales managers and reps to develop practical solutions.
Measure progress from prior adjustments. If you’ve recently tweaked territory assignments or commission structures, assess whether those changes have delivered the desired results.
Technology can make these reviews more effective. A Qobra & Modjo study found that 61.9% of employees using commission management software exceeded their targets in 2022, compared to 30.1% of those relying on Excel or Google Sheets. Real-time data visibility builds trust and enables informed decision-making for both managers and reps.
"With Excel, they actually had no real-time visibility... It created a lack of confidence, a BlackBox feeling." - Aude Cadiot, Revenue Operations Lead at Spendesk
Quarterly reviews should lead to clear, measurable changes. For example, if specific territories consistently underperform, investigate whether the issue stems from market conditions, territory design, or compensation flaws. These insights feed directly into refining your strategy.
Using the insights from your metrics and reviews, you can make timely adjustments to your compensation structure. Flexibility is key to staying competitive and compliant. In fact, 89% of companies revised their compensation plans in 2024 to better align with performance outcomes and talent expectations.
Build adaptability into your plan design. Avoid rigid structures that require complete overhauls. Instead, consider variable commission rates that can be adjusted quarterly or performance multipliers that respond to market shifts.
Stay ahead of regulatory updates. Industries like finance and SaaS face evolving regulations around data privacy, financial practices, and employment standards. Collaborate with legal and compliance teams to ensure your plans meet these requirements.
Establish a clear change management process. Communicate adjustments transparently and with adequate notice. Sudden changes can damage trust and morale. Create a standard process for evaluating, approving, and rolling out updates, involving key stakeholders along the way.
Market conditions can shift quickly. Economic downturns might call for adjusted quotas or commission structures, while new competitors could require changes to territory assignments or product focus. A data-driven approach ensures such decisions are based on evidence, not guesswork.
"There is no magic formula for building a good commission plan. Instead, there are key principles to keep in mind, and the first is alignment with the business strategy." - Aude Cadiot, Revenue Operations Lead at Spendesk
For companies in sectors like finance and SaaS, partnering with specialized consultants can help navigate these complexities. For example, Visora (https://visora.co) works with B2B companies to design governance frameworks that support effective sales compensation programs.
The goal is to balance stability with flexibility. Frequent changes can confuse and demotivate your team, but failing to adapt to major market or regulatory shifts can leave you at a disadvantage. Regular analysis and feedback are essential to striking this balance effectively.
A well-thought-out sales compensation plan is more than just a payout structure - it’s a tool to align your sales team’s efforts with your company’s goals. When designed effectively, these plans ensure that hitting sales targets benefits both the business and the individuals driving those results.
However, there’s a disconnect for many companies. Only 25% of revenue leaders believe their compensation plans align with their business objectives. This disconnect can be costly. Research from McKinsey reveals that aligning sales compensation with company goals can drive up to 50% more growth compared to adjusting marketing or pricing strategies.
Not all sales strategies are created equal, and neither should their compensation plans be. The way you structure incentives should directly support your primary go-to-market approach - whether that’s account-based selling, product-led growth, or enterprise expansion.
If your strategy includes entering new markets, consider territory-specific incentives that reward sales reps for successfully breaking into untapped areas. Additionally, tying commissions to deal profitability can help improve margins. For example, a SaaS company using a land-and-expand approach might offer full commissions for initial deals and residual payouts for renewals or account expansion.
The bottom line? Your sales compensation plan should reinforce the behaviors that align with your company’s strategy.
A strong compensation plan doesn’t just reward closed deals - it incentivizes the right actions at every stage of the sales funnel. To achieve this, focus on both revenue-based metrics and leading indicators like quota attainment, outbound activity, and account engagement.
Here’s a sobering statistic: the average quota attainment across companies is just 74%, and only 28% of sales reps hit their quota in 2023. This raises questions about whether targets are realistic or if plans need recalibration.
To ensure alignment with long-term objectives, consider incorporating customer outcome metrics into your plan. For instance, tie incentives to factors like contract length, renewal rates, or product adoption.
Key metrics to consider when structuring your plan include:
Multi-year contracts deserve special attention. Rewarding reps for closing longer-term deals can increase customer lifetime value and reduce churn. Performance-based accelerators can also be effective. Research from Harvard Business School shows that these accelerators can boost sales performance by about 9.5%. However, it’s essential to design these carefully to avoid unsustainable payouts.
Metrics like these don’t just measure success - they connect your strategy to the day-to-day actions of your sales team.
A compensation plan isn’t just about numbers - it’s also about meeting the expectations of your sales team. Motivating your team while aligning with broader business goals requires transparency, fairness, and adaptability.
Transparency builds trust. Make sure your team understands how the compensation plan works, what behaviors it rewards, and how payouts are calculated. Hidden formulas or vague criteria can erode motivation. A common pay mix in SaaS companies - 50:50 or 60:40 between base salary and variable pay - can balance security with performance incentives.
Fairness across roles is critical for morale. Ensure similar roles have comparable earning potential by setting equitable targets and adjusting for factors like territory potential. For instance, if certain territories consistently outperform others due to external factors, consider revising quotas or reassigning boundaries to level the playing field.
Regular feedback loops are another essential element. Involve your sales team in quarterly reviews to get their input on what’s working and what isn’t. This collaborative approach can help you identify and address issues before they escalate.
Flexibility for market changes keeps your plan relevant. Use modular components like SPIFs (Sales Performance Incentive Funds), accelerators, and clawbacks, which can be adjusted without overhauling the entire system. This adaptability allows you to respond quickly to new challenges or opportunities.
Recognition beyond money can also go a long way in keeping your team motivated. Non-monetary rewards like public acknowledgment, career development opportunities, or exclusive access to high-value prospects can complement financial incentives.
For companies navigating complex compensation challenges, working with specialized consultants like Visora (https://visora.co) can provide added expertise. They help B2B businesses design frameworks that align with their go-to-market strategies while meeting team expectations.
Ultimately, the goal is to strike a balance: a plan that feels fair and motivating to your team while driving the behaviors your business needs to succeed. Achieving this balance takes effort and ongoing adjustment, but the rewards in terms of team performance and business growth make it worthwhile.
For a sales compensation plan to be effective, it must meet legal standards and operate smoothly. Falling short on compliance can lead to hefty fines, while inefficiencies drain valuable resources.
Compliance ensures that incentive programs align with legal, financial, and regulatory requirements, all while maintaining transparency and minimizing risks.
The stakes are high. Over 60% of SEC enforcement actions related to financial statement fraud stem from improper revenue recognition. Additionally, a Gartner survey revealed that sales operations teams devote 68% of their time to non-client tasks, such as managing compensation. This diverts focus away from revenue-generating activities.
Compliance involves adhering to employment laws and financial reporting standards. Key areas to monitor include minimum wage laws, overtime eligibility, and timely payment rules. Missteps in these areas can lead to significant penalties.
One common issue is worker classification. Mislabeling employees as independent contractors can result in fines, as employees are entitled to protections like minimum wage and overtime pay. Starting in 2025, the U.S. Department of Labor will increase the minimum salary threshold for exempt employees to $1,128 per week, or $58,656 annually.
Pay equity is another critical area. For example, in November 2022, a global bank paid $1.925 million in back wages and interest after underpaying 120 female employees and 73 Black and Hispanic workers. Similarly, in April 2023, a technology solutions provider paid $435,368 in back pay and interest to Black applicants who faced hiring discrimination.
Revenue recognition poses additional challenges for SaaS companies. ASC 606 requires that revenue and expenses be recognized over the appropriate period. Tools like QuotaPath can simplify compliance in this area. As Amy Walker explains:
"ASC 606 involves recognizing both revenue and expenses over the proper period of a SaaS or enterprise contract. Software like QuotaPath automates those calculations to keep you compliant."
Clear documentation and structured processes not only protect your company but also build trust with your sales team.
Relying on manual processes often leads to errors and inefficiencies. Studies reveal that 88% of spreadsheets contain errors, yet 60% of organizations still depend on them for compensation calculations. These mistakes can erode trust and create compliance risks.
Automation offers a better path. Sales commission software connects CRM data directly to payment platforms, eliminating manual calculations. Automated systems also provide real-time updates, allow for quick adjustments, and ensure consistent rule application across the organization.
Take runZero, for instance. By integrating QuotaPath with HubSpot, the company automated its commission process and achieved full operation within two months. EverView also saw dramatic improvements. Previously, its 80-member sales team spent about two hours weekly calculating commissions, and half the team didn’t fully understand their compensation until payday. After adopting QuotaPath, they streamlined 35 compensation plans into one unified structure, leading to their highest sales year, with 70% of the team meeting their quotas.
Blackthorn faced challenges as their sales team grew. Their Salesforce formulas couldn’t handle the complexity. By implementing QuotaPath, they onboarded in under two weeks, saving 5–10 hours of work every time a new quota was introduced. This change contributed to three months of record-breaking sales.
When choosing automation tools, focus on platforms that integrate seamlessly with your existing systems, provide real-time data, and include compliance features for regulations like ASC 606. Transparency is also key - sales reps should be able to track their progress and earnings in real time.
For companies with complex sales strategies, consulting firms like Visora (https://visora.co) can help ensure that your technology aligns with your broader business goals.
While automation enhances accuracy, regular audits are critical to sustaining efficiency.
Audits are essential for identifying issues early and ensuring compliance. Amy Walker highlights the importance of being prepared:
"During a due diligence audit, they're going to want to see you have a solid set of books, you have a closing process, you have SOPs in place for your accounting function, and that you've got the proper controls in place. That lets people have faith in you and what you say your business is doing."
Strong internal controls are the backbone of effective audits. These include data validation processes, clear audit trails for calculations, and supervisor approvals for commission payouts. Such measures protect against errors and ensure data accuracy.
Your audit schedule should combine internal and external reviews. Internal reviews, conducted quarterly, can focus on sales achievements and quota performance. External audits, typically annual, offer an independent assessment and are particularly useful during major events like fundraising or acquisitions.
Detailed documentation is crucial for audit readiness. Maintain records of plan changes, approval processes, calculation methods, and any exceptions throughout the year. This level of detail demonstrates your commitment to compliance and helps auditors quickly understand your processes.
Audits also provide an opportunity to evaluate the effectiveness and cost of your compensation plans. Review whether achievement rates meet expectations and whether the total cost aligns with your sales and profit margins. This analysis can reveal areas for improvement while keeping compliance intact.
Neglecting compliance can be expensive. Losing a seasoned sales rep over compensation disputes could cost a company over $2 million in revenue. By combining technology with systematic audits, you can align your governance structure with both strategic and operational goals, ensuring a stronger framework for the future.
When done right, governance transforms sales compensation into a powerful tool for driving business success. The numbers speak for themselves: 74% of sales teams miss their quotas, and 66% of companies deal with commission payment errors. These challenges make effective governance an absolute necessity, not a luxury.
Without a solid governance structure, companies waste time and resources. For instance, administrators spend an average of 89 hours each month resolving manual disputes. On the other hand, businesses with strong frameworks align their sales strategies with broader goals, stay compliant, and keep costs under control.
Collaboration is key. Effective governance relies on teamwork across departments like sales operations, HR, finance, and legal. Joe DiMisa from Korn Ferry puts it best:
"The strongest compensation governance programs are collaborative"
Data-driven planning makes the difference. Successful programs define clear KPIs and assign proper weights to ensure incentive plans support business goals. Regular audits catch potential issues before they spiral out of control.
Transparency and automation solve common problems. Sales reps need real-time access to their commission data and performance metrics. Automated systems reduce errors in calculations and provide the audit trails necessary for compliance.
Strategic alignment ensures success. Compensation plans must reflect your company’s go-to-market strategy. Justin Lane from Forma.ai explains:
"A strong compensation plan should be aligned with company goals, simple to understand and communicate, and give sales reps and managers target objectives to work toward"
These practices form the backbone of a governance program that delivers measurable results.
Start by evaluating your current costs and reward structures. Identify where your compensation plans fall short in supporting business goals.
Build a governance team that includes representatives from all key departments. Establish a shared understanding of the purpose and benefits of governance to ensure everyone is on the same page. Without this alignment, even the best-designed plans can falter.
Set clear design principles upfront. These should address flexibility for business units, decision-making authority, and compliance requirements. These principles will serve as a guide for consistent decision-making across the organization.
Invest in technology to automate repetitive tasks and provide real-time data visibility. This allows your team to focus on strategic planning instead of manual processes.
Finally, commit to continuous monitoring and adaptation. With sales cycles lengthening for over 80% of companies, your governance framework needs to be flexible enough to keep up with changing market dynamics. Regular reviews will help you stay on top of legal updates, business shifts, and recurring issues.
Currently, only 32% of employees feel their compensation is fair. Strong governance can close this perception gap by building transparent, consistent, and strategically aligned programs that drive both individual and organizational success.
For businesses in finance and SaaS looking for tailored solutions, Visora (https://visora.co) provides the expertise to implement these practices effectively.
To comply with regulations like ASC 606, businesses need to focus on crafting clear, detailed contracts that specify performance obligations and revenue recognition criteria. This clarity ensures everyone is on the same page and helps avoid misunderstandings. It's equally important to regularly revisit and adjust compensation plans, working closely with finance and legal teams to keep up with changing standards.
Streamlining processes through automation, maintaining precise records, and having audit-ready documentation are critical steps as well. These measures not only support compliance but also boost efficiency and minimize the chances of costly mistakes.
To make sure your sales compensation plans align with your go-to-market (GTM) strategy, it’s all about designing incentives that tie directly to your top business goals. Whether it’s improving customer retention, growing your pipeline, or bringing in new customers, the compensation structure should clearly connect sales efforts to these objectives. Keeping the plan simple and easy to understand ensures your team knows exactly how their work impacts the company’s success.
It’s also crucial to revisit and adjust these plans regularly. Market conditions and business priorities aren’t static, so staying adaptable can help keep your compensation strategy effective. When incentives are closely linked to your strategic goals, your sales team stays motivated to focus on the activities that truly drive growth.
Technology and automation have reshaped how sales compensation plans are managed, making the entire process smoother and more efficient. Automated systems take care of intricate calculations with precision, cutting down on manual errors and saving valuable time. Plus, they offer real-time updates and better transparency, which makes tracking and adjusting compensation plans far more straightforward.
By automating workflows, companies can ensure compliance, maintain consistency, and free up sales teams to concentrate on strategic priorities instead of getting bogged down by administrative tasks. The result? A more streamlined operation and a hassle-free compensation process for everyone involved.
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