A commission plan is more than how you pay reps — it's a set of instructions about what to prioritize, and your team will follow those instructions, sometimes in ways you didn't intend. Build it carelessly and you'll incentivize the wrong things; build it well and your reps' interests align with the business's. Here's how to design a plan that works.
Reward what you actually want
Reps optimize for whatever the plan pays them for, so make sure that's what you want. If you pay purely on revenue, expect discounting to close deals; if margin matters, reward margin. If repeat business matters, reward retention, not just new sales. Decide what success actually looks like for your business, then make sure the plan pays for that — because whatever you measure and reward is what you'll get.
Keep it simple enough to understand
A plan reps can't understand can't motivate them. If a rep can't roughly calculate what a given deal earns them, the plan isn't guiding behavior — it's just confusing. Resist the urge to engineer a complex formula that accounts for everything; a simple plan reps grasp immediately influences behavior far more than a clever one they can't follow. Clarity beats cleverness.
Make sure it's affordable and fair
The plan has to work financially for the business at every level of performance — including when reps do really well, which should be a good problem. And it has to feel fair to reps, with achievable targets and clear rules. A plan that feels rigged or that punishes success quietly demotivates; one that feels fair and rewards achievement energizes. Both the business and the reps need to win when the plan pays out.
Make the numbers visible
Reps are far more motivated when they can see their progress — how they're tracking toward targets, what they've earned. A plan whose results are a mystery until payday motivates weakly; one where reps can watch their earnings build drives behavior daily. Visibility turns the plan from an abstract policy into a live scoreboard, which is where its motivating power actually comes from.
Reward what you want, keep it simple, make it fair and affordable, and keep the numbers visible. A good commission plan quietly steers your whole sales team toward the outcomes you care about — so design it as carefully as you'd write any other set of instructions you expect people to follow exactly.