Performance-Based Commission

My Best Electrician Just Quit. His Resignation Letter almost Made Me Cry. "I'm tired of carrying dead weight while getting paid the same as someone who does half the work." That was the opening line of Dave's resignation letter. Dave was my star performer: Completed jobs 67% faster than team average Zero rework in 18 months Trained 4 apprentices to excellence Never missed a deadline But I was paying him the same hourly rate as Tom, who: Took 3x longer on identical jobs Generated 40% of our rework issues Avoided training responsibilities Cost us 2 client relationships Steven Levitt (Freakonomics) warned us: "Incentives are the cornerstone of modern life." I was incentivising mediocrity and punishing excellence. The brutal math: Dave generated £47k profit annually Tom generated £8k profit annually But they earned identical salaries. Dave left. Took 3 other top performers with him. Cost to replace them: £7.5K in recruitment, training, and lost productivity. Here's the incentive revolution I implemented with my remaining team: Performance multipliers: Top performers earn 40% more Quality bonuses: £50 for every zero-rework job Team efficiency sharing: Whole team gets bonuses when ALL perform Skill development rewards: £200 for each new certification Peer mentoring incentives: £100/month for training others The transformation was almost instant: Productivity increased 63% across all team members Rework dropped to 2% (from 18%) Team members started helping each other improve Apprentices ASKED for extra training Job completion times decreased by 45% The magic moment:  Tom (my former underperformer) approached me asking how he could earn performance bonuses. Within 8 weeks, he'd transformed into one of my most reliable electricians. Dave called last month. Wants his job back. My answer: "Your welcome, you'll slot in fine (I've learned my lesson)." The complete "Performance-Based Incentive Framework" is detailed in Chapter 10 of "The Electrical Contractors Master Plan." Because when you reward excellence, excellence becomes your standard. Search David Hesketh books on Amazon Are you paying your best people to leave? #ElectricalContractor #TeamIncentives #BusinessGrowth #PerformanceManagement #ElectricalBusiness #TeamMotivation #ProfitOptimization

I recently conducted an informal poll about commission splits between Customer Success Managers (CSMs) and Sales teams, and the results were insightful. Over 95% of companies reported that Sales typically does not take a commission on renewals unless the renewal is especially challenging, often termed a "bounty renewal." In these cases, the Account Executive (AE) receives a commission percentage that does not impact the CSM’s compensation. Other key findings: Commission on upsells and renewals generally represents about 30% of a CSM's total compensation. Companies usually calculate the exact commission percentage by dividing this 30% target compensation by the total Annual Recurring Revenue (ARR) managed by the CSM. How should you determine the right metrics for compensation? Most organizations follow an evolving model: Early-stage Customer Success teams often base commissions on leading indicators like product adoption milestones and completed Executive Business Reviews (EBRs). More mature teams shift to lagging indicators like retention rates, expansion revenue, and Net Revenue Retention (NRR), once they've established effective leading-indicator processes. Examples of Metrics to Consider: Leading Metrics: Scheduled vs. completed Quarterly Business Reviews (QBRs) or EBRs Achievement of specific product adoption milestones Lagging Metrics: Net Revenue Retention (NRR) – the most commonly used metric Customer Retention Expansion Revenue Advocacy (typically better suited as annual or SPIFF-based metrics due to scalability challenges) To illustrate, here’s a clear and simple compensation structure example: Criteria for Achieving 100% Bonus: 90% Renewal Retention (50% weighting) 125% Net Revenue Retention (50% weighting) This approach focuses clearly on two primary goals: retaining customers and expanding revenue. Separating the retention goal ensures that significant churn isn't obscured by substantial upsells. For example, a CSM achieving 85% retention and 115% NRR would achieve approximately 93.22% of their total bonus goal. This simplified structure provides clarity and alignment, motivating CSMs to prioritize both customer retention and growth.

My client introduced quarterly bonuses  They thought it would attract better candidates.  They lost 95% of prospects. Here’s why My client called me just last week to tell me of the change… They thought it would make the roles more attractive. But every top performer I presented it to?  Passed. Here's what went wrong: The original plan was clean. Base plus commission. Hit 99% of quota? You earn 99% of the target.  Fair and predictable. But then leadership wanted to sweeten the deal. Adding quarterly bonuses that could boost total comp significantly. The catch was this though: → You only get the bonus if you hit 100% every single quarter. Miss one quarter at 99%? You lose 15% of your annual earnings compared to the old system. When I started pitching this to seasoned sales pros, the response was immediate: "This feels like a step backward." And they're absolutely right. Under the previous structure, consistent performers hitting 95-99% still made competitive money. Now they're penalized for not being perfect. Top sales professionals want predictable paths to strong earnings. They know what their skills and effort can get them. It shouldn’t be harder to make money. So if you’re going to change your compensation model… Make sure it’s not punishing your most reliable performers.

One of our brands just paid a creator $25,000 for a single piece of content. Here's why that's actually smart business.   Most brands send products to 100 creators, hope 15 of them actually post, and end up with a library of blurry unboxing videos and doorstep package screenshots. Half the content isn't even usable.   One of our customers flipped the entire model.   Instead of paying creators upfront and crossing their fingers, they created a performance-based system where creators earn 5% of the ad spend generated from their content. Not 5% of sales—5% of what the brand actually spends running ads with their videos.   The math sounds crazy, but it works. If a brand spends $100,000 on ads featuring a creator's content, that creator earns $5,000. Scale that to $500,000 in ad spend and the creator makes $25,000. Some could potentially earn $50,000 or more from a single piece of content.   This model performs because creators are now motivated to produce high-quality content since their compensation depends on actual business impact.   The traditional model of asking creators to work for free products and hope for the best is out.   Rewarding creators who create content is in.   This will be a prototype for all campaigns our brands could run in Refunnel.   Looking forward to seeing how this comp plan works for other Refunnel customers. It's exactly what the creator economy needs—a way for talented creators to earn based on real business impact rather than just follower counts.

It’s easy to determine how to compensate a closer since their role is commission based. But what about an inbox manager? Or a customer success rep? How do you structure their pay when there's no obvious revenue number to point to? Well, I actually have a framework that I use to build performance pay for any role, no matter how "non-sales" it seems. Here it is: Step 1 - Figure out what they actually produce You need to identify the measurable thing this person creates or delivers. And I mean really specific. So instead of saying "manages the inbox,", you can say "books qualified calls with prospects." Some examples: - Calls booked with qualified prospects - Client retention rate as a percentage - Scripts written and approved for use Step 2 - Work out the unit economics Let me walk you through this with the inbox manager example. Let's say your agency charges clients $300 for every qualified call you deliver to them. So each call your inbox manager books brings in $300 in revenue. Now, your total cost to deliver that call, when you add up ads, VA time, and tools, comes out to about $150. That leaves you with $150 in margin per call. You can comfortably pay out 15-20% of that margin without killing your profitability. If you take 15% of $150, that's $22.50. Round it up to $25 per call to keep things clean. Now you just repeat this process for every role in your business. Step 3 - Decide on the base and performance split This part really depends on how complex the role is and what your cash flow looks like. You need to figure out what makes sense for your specific situation and margins. Here's what that looks like for an inbox manager: They get $1,000 a month as a base, which covers their time. Then they earn $25 for every qualified call they book. If they hit the target of 40 calls in a month, that's $1,000 in performance pay. So their total potential earnings are $2,000 a month. This structure makes them genuinely want to book more calls, while you still have predictable base costs you can plan around. Step 4 - Get really clear on what "qualified" means You absolutely need crystal-clear definitions here, or you'll end up in constant arguments about what counts and what doesn't. For scripts, here's how I handle it: A script is considered approved when you've personally reviewed it and given the green light to use it. You measure reply rate only after the script has been sent at least 100 times. And any bonus tied to performance gets paid two weeks after the campaign launches. Apply this same level of clarity to whatever role you're paying performance on. Step 5 - Track everything in a simple way Create a performance tracker that you review with your team every single week. They should always know exactly what they've earned and exactly why they earned it. There should never be confusion or mystery around their pay. Your team should be able to calculate their own earnings in their head while they're working.

Performance-based compensation models can effectively align goals between clients and agencies, but they’re not a one-size-fits-all solution. Here’s how to think about them, and what needs to be in place so you can decide when and how to use this model effectively: ✔️ Aligned goals Both parties must share clear performance metrics tied directly to business outcomes. Everyone—from marketing to finance—should agree on how success is defined and measured. ✔️ A strong measurement system Invest in tracking and attribution systems upfront. Without them, you're setting yourself up for disagreements and subjective interpretations of success. ✔️ Ownership of the funnel If your vendor doesn’t control the entire conversion funnel, consider basing incentives on leading indicators (like qualified leads) rather than final revenue. ✔️ Shared source of truth: You have to establish a unified measurement framework that all stakeholders buy into. This helps you avoid endless debates over who is responsible for what outcomes and ensures accountability across the board. ✔️ Guardrails: Define clear parameters upfront. What does “good” look like? How will progress be reported? What cadence works for updates? 👀 When to think twice: ❌ Short-term engagements: Not ideal for quick wins or campaigns that don’t allow time to establish robust tracking systems. ❌ Complex sales cycles: For businesses with long, multi-step buying processes, tying compensation to direct revenue can be overly simplistic and ineffective. ❌ Rapidly changing priorities Performance models are less flexible and can become a source of friction if business objectives shift frequently. While clients often view performance incentives as an “easy switch,” the truth is that they require substantial upfront work to set up and ongoing effort to maintain. Misalignment, incomplete data, or a lack of trust can quickly derail the relationship. Performance-based compensation can unlock incredible results—but only if everyone is playing on the same team with a shared vision of success. If you're considering this model, ask yourself: Are you ready to do the work to set it up for success? Let me know your thoughts—has your experience with performance models been smooth or full of friction?

Switching commission plans from volume-based to quality-based outcomes has been integral in helping my SDR team source seven-figure enterprise deals. Here’s why: Back in 2018, we were targeting our reps on meetings attended. At the time we were still proving product-market fit and didn’t know our ICP or what a great-fit account looked like. So we set a high meetings attended target. With the aim of collecting as many conversations as quickly as possible. It worked for a couple of years. We managed to understand our ICP much better. And brought in a lot of deals that helped scale the company to $20M ARR. The downside of this comp plan was that the quality of the accounts we brought in varied. If we wanted to get to the next level of growth, our commission structure needed adjusting to help us get there. So we switched over from a pure meetings attended target to a part revenue target. The meetings attended target still means our reps are getting the foot in the door with as many accounts as possible. But the revenue driver ensures our reps are sourcing QUALITY accounts which we deem a great-fit account. Key takeaway - commission plans should never be static. As the company evolves and strategic goals change, your commission plans need to change too.

The Marketing Agency Test of 2025 In 2025, every agency faces the same choice: 👉 Stay safe as a vendor. 👉 Or get bold as a growth partner. Most agencies are still stuck in a holding pattern: → Retainers → Billable hours → Outputs that look good but don’t move the needle But here’s the real question every leader must answer: 👉 Would your marketing agency be confident enough to tie its fees directly to client growth? Because in 2025.... That’s the line between survival and relevance. 🟥 The Old Model: Safe but Stagnant Agencies get paid no matter what. Growth or no growth → the invoice goes out. It feels predictable. It feels safe. But it locks agencies in a losing cycle: → Clients see you as a vendor → Procurement squeezes you on cost → Talent burns out chasing hours, not impact Safe today. Dangerous tomorrow. 🟩 The New Model: Bold but Better Agencies only win when clients win. This is outcomes > outputs. → Fees tied to growth, not hours. → Shared accountability with clients. → Value pricing instead of time pricing. It’s harder. It’s riskier. But the upside is undeniable: → Clients trust you more → Contracts get bigger and stickier → You move from cost centre → growth partner 👉 Imagine this: → A campaign improves CAC efficiency by 20%. → Your fee scales with that outcome. → That’s partnership. 🌀 The Implications Stay in the old model: 🟥 Shrinking margins 🟥 Shorter client relationships 🟥 Endless procurement battles Shift to the new model: 🟩 Aligned growth goals 🟩 Long-term revenue stability 🟩 A competitive edge against “time sellers” 🌀 How Agencies Pivot 1) Define value, not hours If you can’t measure it, you can’t price it. 2) Restructure into growth levers Link creative, media, and tech directly to revenue KPIs. 3) Invest in analytics + AI Proof beats perception every time. 4) Change contracts Add performance-based clauses that align incentives. 5) Re-skill talent Build strategists and analysts, not just AI executors. 🌀 What Everyone Gains For agencies: → Deeper client trust → Bigger upside potential → Resilience against procurement cuts For clients: → Shared accountability → Clear ROI for every dollar or pound → A partner invested in outcomes, not hours 🌀 My Take In 2025, “safe” is actually the riskiest move. The agency of the future won’t be defined by what it delivers. It will be defined by what it CREATES. → Value → Growth → Measurable outcomes 👉 Agencies that share risk will share reward. 👉 Agencies that cling to the past will fade into it. So here’s the question: Would your agency be bold enough to put skin in the game? ivanfernandes.me

AE Tech Commission Plans: Choosing the Right Performance Indicators Get it wrong, and you risk: ❌ Confusing your sales team with complicated metrics ❌ Incentivizing the wrong behaviors ❌ Losing top talent to competitors with better commission plans Get it right, and you can: ✅ Increase sales performance ✅ Drive sustainable revenue growth ✅ Foster a high-performance sales culture 𝐒𝐭𝐞𝐩 𝟏️: 𝐊𝐞𝐞𝐩 𝐈𝐭 𝐒𝐢𝐦𝐩𝐥𝐞, 𝐏𝐫𝐢𝐨𝐫𝐢𝐭𝐢𝐳𝐞 𝐂𝐥𝐞𝐚𝐫, 𝐌𝐞𝐚𝐬𝐮𝐫𝐚𝐛𝐥𝐞 𝐈𝐧𝐝𝐢𝐜𝐚𝐭𝐨𝐫𝐬 The best commission plans use a small number of key performance indicators (KPIs) that are: ✔ Easy to measure (quantitative, not subjective) ✔ Directly tied to business revenue ✔ Transparent (so AEs understand exactly how they’re being evaluated) Top Performance Metrics for AEs: ✔ Annual Recurring Revenue (ARR) or Monthly Recurring Revenue (MRR) – These are the gold standards, ensuring AEs are incentivized to drive long-term, recurring revenue. This is the most common metric, used for 70% of AEs, as it directly reflects revenue impact. ✔ New Customers Signed – Used for 30% of AEs, great for companies focused on acquiring new users above all (even above revenue). Ideal for high-velocity sales cycles. 💡 Best Practice: Choose one primary metric (e.g., ARR) and one or two secondary indicators based on your sales strategy. 𝐒𝐭𝐞𝐩 𝟐 : 𝐔𝐬𝐞 𝐚 𝐇𝐲𝐛𝐫𝐢𝐝 𝐌𝐨𝐝𝐞𝐥, 𝐁𝐚𝐥𝐚𝐧𝐜𝐞 𝐈𝐧𝐝𝐢𝐯𝐢𝐝𝐮𝐚𝐥 𝐚𝐧𝐝 𝐂𝐨𝐥𝐥𝐞𝐜𝐭𝐢𝐯𝐞 𝐆𝐨𝐚𝐥𝐬 Most companies focus only on individual quotas, but a growing number are adding team-based incentives to: ✔ Encourage collaboration ✔ Drive big-picture revenue growth ✔ Ensure a healthy, team-oriented culture How to Implement Team-Based Incentives: ✔ Global Revenue Bonus – If the entire sales team reaches a set revenue threshold, everyone receives a bonus. ✔ Big Deal Incentive – If the team lands a high-value account, all contributing AEs get rewarded. ✔ Cross-Team Collaboration Bonus – Incentives for working with marketing, SDRs, or customer success to close deals. 💡 Best Practice: A 70/30 or 80/20 split between individual and team-based incentives keeps AEs motivated while fostering teamwork. 𝐒𝐭𝐞𝐩 𝟑 : 𝐑𝐞𝐰𝐚𝐫𝐝 𝐌𝐮𝐥𝐭𝐢-𝐘𝐞𝐚𝐫 𝐃𝐞𝐚𝐥𝐬 & 𝐔𝐩𝐟𝐫𝐨𝐧𝐭 𝐏𝐚𝐲𝐦𝐞𝐧𝐭𝐬 One of the biggest mistakes companies make? Paying the same commission for short-term and long-term deals. How to Reward Long-Term Revenue: ✔ Multi-Year Contracts – Encourage AEs to secure long-term commitments by offering commission multipliers. Example: A 3-years deal earns 1.2x the commission of a 1-year deal. ✔ Upfront Payments – Reward deals where customers pay in full upfront. Example: Offer a 20 to 25% bonus on commission for one-time multi-years payments. 💡 Best Practice: Implement a tiered commission structure where AEs earn more for securing longer-term and upfront payment deals. How does your company structure AE commissions? Are you rewarding long-term value and team collaboration? Let’s discuss in the comments!

10 years ago, it was fairly common practice for CRO consultants to charge on a kind of no-win-no-fee basis. They wouldn't ask for a fee upfront but, instead, take a percentage commission of the annualized value of 'winning' tests. I don't believe this happens much today. However, as an agency, clients often inquire about performance-based pricing. When they do, they're usually uncertain about the structure, but it might end up resembling what I described above if other agencies agree to it. NEVER pay agencies and consultancies based on winning tests in this way. Here's why: > The statistics of A/B testing are very complicated. It might seem like an A/B test yields a clear outcome, like 'this test won and will improve the conversion rate by 10%,' but this is a significant oversimplification. In reality, it's about probability and degrees of confidence. While very effective for decision-making, it's highly flawed for projecting and forecasting financial value. > Due to the complexity, paying someone to find 'winners' makes it VERY easy for them to interpret statistics in their favour. Many would do this deliberately, but everyone will do it subconsciously. As a result, you end up paying for false positives that won't benefit you. > This practice misunderstands the nature of experimentation. There's nothing inherently 'better' about a winning test compared to a losing one because both provide decision-making data. Avoiding poor ideas not only saves you money but also the cost of feature development. Chasing 'winners' reflects a fundamental misunderstanding of essential concepts. When you hire a good experimentation agency, you're investing in the skills and expertise needed to enhance risk management and R&D in your innovation process. You're not buying 'winners.' It's entirely valid to want a) de-risking of your investment in the agency and b) some kind of reassurance that you will get the amount and quality of work you are expecting. Unfortunately though, 'performance'-based deals do neither of these things effectively and are actually counter-intuitive to these requirements. #cro #experimentation #ecommerce #digitalmarketing #ux #userexperience