Incentive Alignment Audit —
Section 01 of 04

Most comp plans are designed around what is easy to measure, not what is strategically important. Revenue is easy to measure. Margin is harder. Contract length is harder still. Customer health is hardest. The plan rewards what it can count. The question is whether what it can count is what the business actually needs.

If the list of rewarded behaviours and the list of strategically important behaviours do not overlap, the plan is misaligned. Not broken. Misaligned. The fix is not to pay more. The fix is to pay for different things.

Every incentive structure has shadows. If the plan pays on new logo revenue, it penalises time spent on expansion. If it pays on closed revenue, it penalises accurate forecasting. If it pays on volume, it penalises qualification. The question is not whether there are shadows. There always are. The question is whether the shadows are falling on something important.

A plan that inadvertently penalises accurate forecasting will produce sandbagging. A plan that penalises expansion will produce a CS team that cannot meet renewal targets alone. A plan that penalises qualification will produce a pipeline full of noise. These are not management failures. They are design outputs.

If the plan pays on revenue and not on margin or deal profitability, there is a discount rate at which it becomes rational for a rep to close a discounted deal rather than hold price. That rate is not a character question. It is a mathematics question. If you have not calculated it, the plan has already answered it for you.

If the rational discount rate under the plan is 25% or higher, the plan is paying for discounting. If the rational discount rate is also the discount rate at which deals close most easily at end of quarter, the plan is paying for end-of-quarter discounting. The spreadsheet is the evidence. The behaviour is the output.

This question does not require judgement. It requires a spreadsheet. Put the numbers in. If the commission is identical, or if the end-of-quarter close is higher due to accelerators, the plan is paying for last-week discounting. The rep is not gaming the system. The system is designed this way. The question is whether the designers knew.

If nobody has run this calculation before, the plan has been operating with an unexamined discount incentive for however long it has been live. The appropriate response is to run the numbers immediately, not to coach the behaviour. Coaching a mathematically rational behaviour is not management. It is friction.

A SaaS business with 90% of revenue in renewals that pays 3x the commission rate on new logos is telling reps where to spend their time. The plan is not wrong because it emphasises new logos. It is wrong if the business needs renewals to survive and the plan treats them as a distraction. The weighting is a statement of priorities. The question is whether it is the right statement.

If CS is consistently struggling to hit renewal targets and sales is consistently hitting new logo targets, the comp plan is probably explaining both outcomes. The plan is working. It is just working in the wrong direction.

Reps listen to what the plan pays for. Everything else is noise. If leadership says it cares about customer health scores, implementation success, and expansion potential, but none of those appear in the comp plan, the sales team has received the correct message: those things do not matter at bonus time. The plan's silence is not neutral. It is instructive.

Make two lists: what the business strategy says it cares about, and what the comp plan pays for. The gap between those two lists is the list of things reps are being told not to care about. Every item in that gap has a downstream consequence somewhere in the revenue machine.

A plan that pays quarterly accelerators on a nine-month deal cycle creates a structural tension. Reps cannot optimise their earnings within the reward cycle the plan sets. The result is either discounting to compress timelines, sandbagging to manage which quarter the close falls in, or disengagement. None of these is a character problem. All of them are design outputs.

If the average deal cycle is longer than the earning cycle, reps will attempt to manage the mismatch. How they manage it depends on what the plan makes possible. Discounting to compress is possible if the plan pays on revenue. Sandbagging is possible if the plan has quarterly accelerators. The answer to this question tells you which behaviour to look for.

If commission is never clawed back on churned deals, the plan has no mechanism to make sales care about customer fit. The incentive to close is clear. The incentive to qualify is absent. The result is predictable: pipeline that closes badly, a CS team cleaning up mismatched customers, and churn that sales attributes to the product and CS attributes to sales.

If the answer is "nothing happens," the plan is rewarding closes without regard to their quality. This does not require malice. It requires a rep who rationally prioritises volume over fit in a plan that rewards volume over fit. The rep is doing exactly what the plan asks. The problem is the ask.

Comp plans designed without rep input create unintended consequences that reps could have predicted. Comp plans designed without CS input create post-sale problems that CS will spend years managing. Comp plans designed without finance input create liability that finance discovers at year-end. The question is not whether any of these happened. It is which ones did.

If the plan was designed in a room that did not include the people who operate under it or who manage its downstream consequences, the unintended consequences in the plan are the price of that exclusion. They were predictable. They were not predicted because the right people were not in the room.

This is the most important question in the audit. It requires no data, no spreadsheet, and no external analysis. It requires only honesty. A plan that has no answer to this question — where maximising rep earnings and maximising business value are perfectly aligned — is exceptional and probably theoretical. Most plans have an answer. The question is whether anyone has asked it before.

If the honest answer is a clear, specific description of a behaviour — discount to close in Q4, sandbag large deals for accelerator quarters, focus only on new logos, avoid expansion opportunities that pay less — then the plan is designed to produce that behaviour. Not by accident. By structure. The behaviour is not a management problem. It is evidence.