Stop Paying for the Wrong Results: Fixing Misaligned Incentives Before They Derail Growth

Revenue teams don’t shy away from celebrating hitting their targets, nor should they. Bonuses are handed out, dashboards light up green, and quarterly reports look strong. Yet behind the success metrics, cracks begin to show as customer churn slowly increase, profit margins begin to narrow, and internal collaboration declines.

In many organizations, this disconnect doesn’t necessarily stem from poor execution, but from well-intentioned incentive plans that reward the wrong behaviors. When compensation systems emphasize activity over impact, short-term gains over sustainable growth, or departmental wins over enterprise results, they quietly erode long-term performance.

We’ve worked with dozens of organizations where misaligned incentives didn’t just fail to motivate, they actively undermined growth. The goal of incentive compensation management is to align human motivation with business strategy. However, without careful calibration, it can just as easily drive your teams in the opposite direction.

Modern revenue ecosystems are intricate. Sales, marketing, and customer success teams now operate in continuous cycles of engagement rather than linear hand-offs. Yet many incentive structures were built for simpler times; designed around single-stage performance metrics and isolated departmental goals.

When compensation systems fail to reflect interdependencies, the result is predictable: fragmented focus and conflicting priorities. Properly structured incentive programs can increase individual performance by up to 44%, which means poorly structured ones can just as easily suppress it.

The issue isn’t only financial. Misaligned incentives create tension between departments, foster internal competition, and reduce trust in leadership. Over time, even top performers disengage, seeing effort disconnected from meaningful impact.

1. Rewarding Volume Over Value

Incentive plans that focus purely on revenue or deal count can distort seller behavior. When every dollar booked looks the same on paper, teams naturally prioritize easy wins, even if they’re low-margin, high-churn deals that drain resources later.

Organizations that shift toward value-based metrics, such as average deal size or customer lifetime value, outperform peers that rely on pure volume goals. These metrics encourage strategic selling, prioritizing relationships and outcomes that sustain the business, not just fill the pipeline.

2. Encouraging End-of-Quarter Fire Drills

Quota deadlines often create a spring mentality. In the final weeks of a quarter, reps under pressure slash prices, over-promise delivery, or pull deals forward prematurely. This drives an artificial revenue spike, usually followed by a lull and customer dissatisfaction.

Nearly 80% of quarterly sales spikes correlate with lower average margins and higher churn rates. When the system rewards timing rather than quality, predictable cycles of overextension and correction follow.

To combat this, leading companies are shifting to rolling performance models, which reward consistent execution and longer-term outcomes rather than frantic end-period surges.

3. Measuring Activity Instead of Impact

When marketing teams are rewarded on lead quantity, sales on closed deals, and RevOps on process efficiency, success is defined in silos. Each group optimizes its own metrics; lead counts climb, close rates drop, and operational “efficiency” doesn’t necessarily translate to growth.

Organizations integrating multiple performance measures outperform single-metric plans by up to 30% in revenue growth. Shared accountability doesn’t just improve coordination, it builds mutual trust.

When all teams influence the same success metrics, collaboration becomes a natural driver of performance.

4. Ignoring Retention and Post-Sale Value

Incentives that stop at a signed contract miss the bigger picture. In SaaS and recurring-revenue models, customer retention and expansion often drive the majority of profitability. Yet many, organizations fail to link compensation to long-term account health.

Increasing customer retention by just 5% can raise profits by 25-95%. Incentive structures that reward renewals, upsells, and customer satisfaction turn account management into a growth engine rather than a maintenance function.

The most effective compensation systems extend accountability across the entire customer lifecycle ensuring that revenue earned is revenue sustained.

5. Over-Engineering the System

Complexity is one of the silent killers of incentive effectiveness. Some organizations add so many variables, tiers, and exceptions that employees can’t understand what actually drives their pay. Confusion breeds mistrust, and mistrust erodes motivation.

Clear and simplified compensation structures consistently rank among the top three factors influencing sales engagement and retention. When employees understand exactly how performance connects to rewards, they’re more confident in the system, and far more motivated to excel within it.

When people can see the direct line between their effort and their earnings, they channel their energy toward outcomes that matter most.

Compensation isn’t just a pay mechanism; it’s a cultural signal. Every incentive tells employees what the organization truly values. When plans emphasize short-term gains, people mirror that behavior. When rewards reinforce collaboration, integrity, and sustainable performance, those traits spread naturally.

Properly structured financial incentives can yield up to a 20x return on investment during major performance transformations.

That’s why incentive misalignment is not just a financial problem; it’s a cultural one. It shapes who stays, how they behave, and what success looks like inside your organization.

Executives often sense when something’s off but diagnosing incentive misalignment requires structured analysis. Here are the telltale warning signs we see most often in client assessments:

• Short-Term Surges Followed by Stagnation:

  Performance peaks near bonus cycles, then drops sharply

• Interdepartmental Friction:

  Teams debate attribution or handoff responsibilities more than outcomes.

• Metric Confusion:

  Employees can’t explain how their compensation is calculated.

• Profitability Erosion:

  Revenue grows, but margins decline.

• Declining Engagement:

  High performers leave, citing fairness or lack of clarity as reasons.

Each of these symptoms signals a deeper design flaw: the incentive plan has lost alignment with strategic intent.

Based on two decades of field experience, we’ve come up with a five-part recommendation plan for redesigning incentive compensation to drive sustainable performance:

1. Begin with Business Outcomes

Start with enterprise-level objectives – growth, profitability, retention, market expansion – and cascade incentives from there. Each department’s plan should directly support one or more of those outcomes.

When leadership begins with company strategy rather than departmental tradition, incentive design becomes a strategic exercise, not an administrative one.

2. Balance Individual and Shared Accountability

Use balanced scorecards that incorporate both role-specific and cross-functional metrics. For example:

• Sales: quota attainment, deal quality, and renewal rate.
• Marketing: opportunity value, conversion ratio, and pipeline contribution.
• RevOps: data accuracy, cost efficiency, and pipeline velocity.

Balanced structures create synergy, rewarding individual excellence and team collaboration equally.

3. Keep the Math Simple

Incentive plans should be easy to understand and easy to explain. A good rule of thumb is that if it takes more than five minutes to describe how compensation is earned, it’s too complicated.

Clarity breeds confidence. When people understand exactly how their actions influence outcomes, they act decisively and creatively within those boundaries.

4. Implement Transparent Technology

Modern incentive compensation management tools integrate CRM, finance, and marketing data into a unified view. This enables real-time tracking, reduces disputes, and increases credibility.

Automation also ensures accuracy, eliminating manual errors that can undermine trust. Transparency isn’t just an ethical priority; it’s a competitive advantage.

5. Review, Test, and Adapt

Market conditions change. So should your incentive plans. Conduct quarterly reviews to assess whether metrics are driving the intended behaviors. Gather both quantitative performance data and qualitative employee feedback.

Continuous optimization transforms incentive management from a reactive task into a proactive performance system.

Incentive compensation is one of the most powerful, and misunderstood, levers leaders have to influence behavior. When plans are designed thoughtfully, they align motivation with mission, helping teams pull in the same direction. When they’re misaligned, they quietly drain energy, fragment collaboration, and reward short-term wins that come at a long-term cost.

The insights throughout this blog share a common thread: clarity, alignment, and accountability are what separate effective incentive systems from destructive ones. The most successful organizations approach incentive compensation management as a living strategy, not a static spreadsheet.

• They value quality over quantity, rewarding sustainable deals instead of inflated volume.
• They balance individual excellence with collective success, ensuring no team wins at another’s expense.
• They extend incentives across the entire customer lifecycle, turning retention and expansion into shared priorities.
• They keep plans simple and transparent, removing guesswork and building trust.
• And they continually measure and refine, ensuring the behaviors being rewarded always support the company’s evolving strategy.

At its best, incentive design is not just a tool for motivating employees; it’s a mechanism for reinforcing organizational purpose. When people see that their compensation reflects real contribution to growth, collaboration becomes instinctive, and performance becomes sustainable.

The takeaway is simple: your incentive plan is already shaping behavior. The question is whether it’s shaping the behavior you actually want. Align it with your strategy, make it transparent, and refine it relentlessly, and it will stop being a liability and start becoming one of your most reliable growth engines.