Let’s talk commissions. Not the fluffy, theoretical kind that consultants babble about in boardrooms. The real ones that determine whether your top performers stick around or update their LinkedIn profiles.

I’ve spent 15+ years watching companies shoot themselves in the foot with bad commission structures. It’s fascinating, painful, and completely avoidable.

The Fantasy Land Quota Phenomenon

You’ve seen it. You’ve probably experienced it.

A company sets a $1M new business quota despite their top performer of the last five years maxing out at $320K. The sales leader who approved this probably also believes in unicorns and that diet soda actually helps you lose weight.

When you ask why the quota is three times higher than what’s ever been achieved, you’ll hear beautiful corporate poetry:

“We need to stretch goals!”
“The market is expanding!”
“New product features will drive higher ASPs!”

Translation: “We pulled this number out of thin air because it makes our investor deck look pretty.”

This isn’t using the SMART framework (Specific, Measurable, Achievable, Relevant, Time-bound). This is using the DUMB framework (Delusional, Unrealistic, Morale-Busting).

If your best rep ever hit $320K, your quota should reflect reality. Set it at $360K. If someone blows past it, great! Pay them handsomely and adjust fair for next year. But setting it at $1M isn’t “ambitious”. It’s fiction.

The 103% Tragedy: When Finance Gets Creative

Picture this: After grinding all year, your rep hits 103% of quota. Champagne time, right?

Not so fast. Suddenly, your finance team transforms into forensic accountants. They discover that one deal from Q1 had “implementation issues.” Another from Q2 “doesn’t meet our new revenue recognition criteria.” Oh, and that big deal from Q3? The customer “might” churn next year, so we should “adjust” the commission value.

Just like that, 103% becomes 94.7%, and no accelerators get paid.

This isn’t fiscal responsibility. It’s theft wearing a business casual outfit.

I’ve sat in rooms where teams proudly explained how they “saved” the company money in commissions through these “adjustments.” Meanwhile, the rep who lost that money is updating their resume, taking their relationships to your competitor, and you’ve just “saved” yourself into a revenue hole next quarter.

The Phantom Commission Plan: “We’ll Figure It Out Later”

This one’s my personal favorite for its sheer audacity.

“We offer a competitive base with an uncapped variable component,” says the job description.

The candidate accepts. Three months in, they’re still asking, “So… how exactly do I earn my variable?”

“We’re finalizing the plan.” (Translation: We haven’t started thinking about it)
“It’s being approved by management.” (Translation: No one wants to commit to anything)
“It’s complex because we value so many different metrics.” (Translation: We want to maintain maximum wiggle room)

This approach isn’t just unprofessional. It’s psychological warfare. You’re essentially telling your sales team: “Work really hard selling something, and maybe, if we feel like it, we’ll reward you based on criteria we haven’t disclosed.”

Would you shop at a store that said, “We’ll tell you the price after you take it home”? Of course not. So why would talented salespeople stick around for this nonsense?

The Commission Holy Trinity: What Actually Works

After watching the good, bad, and ugly of commission plans for years, I’ve implemented and found the formula for plans that actually work. It consists of 8 key principles with a focus on:

1. Cost Neutrality First: Your base commission threshold should cover the cost of having the team. Commissions should kick in when real value is created. This protects the company from paying out when no value is generated.

2. Reward Profit, Not Just Revenue: Structure commissions around deals that actually make money. A $1M deal that costs $1.2M to deliver isn’t worth celebrating.

3. Incentivize Customer Success: Tie a portion of commission to retention, expansion, and customer health scores. A salesperson who sells deals that churn in 3 months isn’t creating value. They’re creating a treadmill.

This approach means your finance team can sleep at night (the business is protected), your reps can eat well (they make good money when they create value), and your customers stick around (because they weren’t oversold).

Implementing a Actually Fair Commission Structure: The Nuts and Bolts

Here’s how to put this into practice without needing an MBA:

Step 1: Set realistic quotas
Look at historical performance. Take your top quartile’s average, add 10-15%, and there’s your quota.

Step 2: Create simple tiers with accelerators

  • No commission rate
  • Proportional commission rate
  • Standard commission rate
  • Standard rate + 10%
  • Standard rate + 25%

No weird caps, cliffs, or decelerators that punish success.

Step 3: Add customer success components
Commission should include:

  • Contract duration beyond standard
  • Expansion revenue

This rewards the right behaviors without being so complicated that your reps need a spreadsheet to understand their paycheck.

Step 4: Document everything clearly
If your commission plan can’t fit on 1-2 pages, it’s too complex. Period.

Step 5: Pay on time, every time
Commission delays aren’t a cash flow strategy. They’re a trust destroyer. Pay commissions when you said you would, or prepare to lose your best people.

The Real ROI of Fair Commission Plans

Fair commission plans aren’t charity. They’re strategic business investments that deliver measurable returns:

  • Reduced turnover: Each sales departure costs 1.5-2x their annual salary to replace.
  • Institutional knowledge retention: Seasoned reps understand your product, customers, and competition in ways no training program can replicate.
  • Culture of trust: Sales teams talk. When they believe the company has their back, they’ll have yours.
  • Predictable performance: Reps who trust their commission structure focus on selling instead of spreadsheet verification and plan interpretation.

I’ve seen companies transform their sales org by simply implementing fair, transparent commission structures.

The Bottom Line (Literally)

You can have the best product in the world, but if your commission plan alienates your sales team, you’re sabotaging your own success.

Great salespeople aren’t naive. They understand business reality. They don’t expect to make millions selling discounted products that don’t generate profit. But they do expect fairness, transparency, and to be rewarded when they create value.

Want to build a commission plan that actually works? One that incentivizes high performance while ensuring financial stability? One that your finance team AND your sales team can both smile about?

Give me a shout. I’ll walk you through it step by step. Because selling is hard enough without having to fight your own company to get paid.

Remember: When salespeople win fairly, the company wins big. It’s not complex math, it’s just good business.