The Problem: Why Bonuses Aren't Enough
This week’s question came from a manufacturing firm with five vertical divisions, each led by a head of sales:
“Nicola, how do I incentivise my sales leadership team to be ambitious for growth when they set their own targets and earn bonuses for exceeding them?”
It’s a classic scale-up dilemma. You want to reward performance—but not if it’s based on cautious forecasting. So how do you design incentives that drive the right behaviour?
A Look at Motivation Philosophy
If you’ve read Dan Pink’s book Drive, you’ll know his three pillars of motivation:
- Autonomy
- Mastery
- Purpose
I’m all for that. But in sales, we also need commercial clarity. Incentives must align with strategy—and they must drive growth.
The Three Reward Buckets: A Deeper Dive
I break incentives down into three categories:
1️⃣ Commission (Revenue & Profit-Driven)
- A percentage of revenue, gross profit, or other metrics
- Can be stepped (higher performance = higher percentage)
- Should have a minimum threshold (e.g. cost × 3) before payout
- Can be individual or team-based
2️⃣ Bonuses (Milestone Rewards)
- Fixed payments tied to specific outcomes
- Can be based on revenue, profit, KPIs, or activity
- Useful for rewarding milestone achievements or strategic behaviours
3️⃣ Perks (Non-Monetary Rewards)
- Non-monetary rewards (e.g. extra holiday, team experiences, gifts)
- Great for building culture and camaraderie
- Can be tied to performance or offered as surprise recognition
In one of my businesses, our Christmas party budget was tied to annual performance. Some years we had champagne and fireworks. Other years? Pizza and wine at mine. And everyone was happy—because the reward matched the result.
The Fix: Designing a Smarter Sales Compensation Plan
In this case, bonuses were being paid for exceeding self-set targets. But the targets weren’t ambitious enough. So here’s what I recommended:
- Switch to commission above target, not bonuses
- Set the target as the threshold—no payout below it
- Step the commission to reward higher performance
- Add a “kicker” bonus for exceptional results
- Consider paying on gross profit growth, not just revenue
- Layer in team bonuses to encourage collaboration
This way, the more they sell—and the more margin they protect—the more they earn. It’s a win-win.
Want the Full Breakdown?
I unpack all of this in my latest video:“How Do I Incentivise My Team?”