[matthewfcarlson]

Perhaps I’m just not in sales and haven’t seen how complicated it gets. But they start the article with keep it simple and end up with a stepwise function with two different slopes and an excel spreadsheet to calculate it.

[resolutebat]

The example given here is still incredibly simple compared to the quota/commission structures at major companies. Negotiate an enterprise deal with a multinational, and now you need to allocate quotas to a sales team split across several countries, work out how to handle subcontractors and partners, bonus incentives for what corporate is trying to push today, account for change requests and maintenance and support and ongoing consumption and upgrades, etc etc.

[nostrebored]

I’ve been at companies where managers had to book hour long meetings to explain changing comp structures — with internal presentations. They had to explain what target is, how target is calculated, how revenue is attributed, what the performance bonus is, things like additional performance incentives past target, special incentives for individual products… they can get much worse

[marcus0x62]

I worked in tech sales (sales engineering) for quite a while, both as an individual contributor and as a manager. It isn't unusual for plans to be way more complicated than what is described in the article, and for sales reps (and managers) to not really understand their comp plan. It is also common for them to shoot themselves in the foot by structuring a deal in such a way that they lose a lot of money because they didn't take the time to understand the comp plan. It is also true that they don't take the time to understand the plan because they think it will change every year (it probably will) and that every change is designed to screw them out of commission dollars (probably also true.)

Also, the comp plan described in this article is absolutely terrible. Reps on 60/40 quotas. Having the sales VPs more levered than the reps. Not having a linear base commission rate to 100% of plan (you make sure you get to the company revenue goal by a) setting a realistic goal and b) incentivizing the reps to get past 100% of plan, not by penalizing them until they hit plan.

[cqqxo4zV46cp]

I have a tiny bit of sales experience, certainly less than you. My understanding is that these things end up so complicated for two reasons.

In part it can be a reflection of the real-world complexities of an organisation’s financial incentives. It’s easy, especially not being in the sales org and looking in at it from outside, to expect things to be as simple as “more revenue == better”. But then typically businesses of a certain size will have more nuanced incentives. It’s less expensive to sell service x over y in some opaque hard-to-quantify way. Direction has come from upstairs to push more of product z to keep a supplier happy. Blah blah.

But it’s just as much poor system design from whoever is devising the comp structure. It’ll suffer from the same issues as the income tax system in many jurisdictions. Layers and layers of tweaks to incentivise behaviour x or y for opaque reasons until you end up with a kludge of…bleh.

And this is all setting aside comp structures that actively seek to banboozle sellers into losing out, by way of insane complexity. Reminds me of buying a used car.

[marcus0x62]

What you've written about is mostly it. The other aspect is that setting fair quotas (individually, and at the district level) is really, really, hard but managing sales expense is extremely important. The two concepts are inextricably linked[0]. There's a huge amount of information hiding (mostly on the part of the sales reps,) and companies will compensate by putting limits in the comp plan that attempt to prevent windfall situations. Usually, there is a specific windfall clause that is straightforward enough: past a certain commission or quota attainment or transaction size threshold, the company reserves the right to review the circumstances of a particular deal and decide how to pay commission on it outside the usual terms of the comp plan. But beyond that, there will frequently be rules about what counts as new business vs renewals (which generally are paid at vastly different rates,) or even if certain transactions will be paid at all (where this occurs, it is usually limited to large transactions the company knows about, but that weren't forecast for the current fiscal year and therefore not part of the rep's quota.)

0 - while every tech company in recorded history puts their top performers on display at their annual sales meeting and boasts about how these people all exceeded plan by x% and just bought a new lakehouse or something, privately, the sales leadership gets raked over the coals due to over performance. I once received a top district award in front of the whole company, then not 30 minutes later got chewed out along with my colleagues over how many people overachieved and how much extra it cost the company, etc.

[readthenotes1]

Every salesperson I've met can use Google and is acutely aware of how the next deal affects their compensation.