Many companies use bonus schemes to motivate salespeople, yet the majority of models fail in practice. They become too complex, too opaque or aimed at the wrong targets. Instead of creating motivation, they end up creating frustration. Here you get an overview of the typical pitfalls, and concrete advice on how to design a better incentive model.
A classic mistake is to make the model unnecessarily convoluted. The more rules, rates and exceptions, the harder it is to understand.
Imagine a business where salespeople get both commission per sale, bonus for hitting a total quarterly ratio, and an additional reward if a specific product line exceeds a certain level. On paper, it sounds fine, but in practice the seller quickly loses track.
If a salesperson cannot explain how much a single deal means to the salary, the model loses its motivating effect. Many end up making their own spreadsheets, and that creates duplication and distrust.
A bonus model should be able to be explained in two minutes. The more simple and transparent, the stronger the effect will be.
Another pitfall is that the bonus scheme rewards wrong things. If the company wants customer retention, but the model only rewards the redrawing of contracts, the behavior will point in the wrong direction.
Bonus should reflect the main priorities of the company: growth of a segment, customer satisfaction or profitability. When the incentives match the strategy, the entire organization works in the same direction.
An example might be a SaaS company that wants to reduce churn. If sellers are rewarded only for new sales, they may have incentive to close deals that are not long-term tenable. If instead a bonus is introduced that rewards for customers who remain active for 12 months, behaviour changes markedly.
Transparency is essential to building trust. When rules and calculations are unclear, it leads to discussions about fairness.
Digital solutions can help by making bonus visible in real time. When sellers can see their earning on an ongoing basis, doubts are removed and management saves time explaining and defending the numbers.
Imagine the difference between two scenarios: In one, the seller is not told until three weeks after the end of the quarter whether the bonus has been properly paid out. In the second, the seller can follow his bonus day by day in an app. The first scenario creates uncertainty, the second creates motivation.
Motivation works strongest when the reward closely follows the effort. If months elapse between a closed sale and the bonus payout, the incentive loses effect.
Even if the company pays out the bonus only after the customer has paid, you can still see the earned bonus in real time. In this way, the employee experiences that the effort has already been registered and recognized.
Psychology is what makes the difference. When sellers get quick feedback on their efforts, the behavior is reinforced. It's the equivalent of clapping off a performance at the same moment it's delivered, not three months later.
An incentive model that is not perceived as fair quickly creates demotivation. This can happen if sellers with widely different markets and customer portfolios are measured on the same quota.
Differentiating goals according to market conditions ensures that everyone has a fair chance of succeeding. It creates balance and reinforces the experience that the model is fair.
For example, a real estate agent in an area with lower home prices should not have the same revenue target as a colleague in an area with higher prices. With adjusted quotas, the comparison becomes fair and the motivation is kept alive.
Even a well-thought-out bonus model can fall to the ground if it is not communicated clearly. Many companies launch new models in a long document that few understand. Employees need to have the model explained in language that makes sense, and it needs to be done on an ongoing basis, not just at startup.
When managers take the time to explain the purpose of the model and show concrete examples, it becomes easier to accept. Communication, in this context, is not just information, but part of the incentive itself.
A bonus model is more than just an addition to the salary. It is one of the most powerful tools for managing behavior and driving growth. When the bonus scheme becomes too complex or opaque, it loses its power. But when it is simple, fair and coupled to strategic objectives, it instead becomes a growth engine that lifts both motivation and company performance.