Compensation and incentive design
Pay is the largest cost in most companies and the one with the most influence on behaviour. A commission plan that pays on revenue sells discounts. A bonus that pays on the owner's mood pays for nothing. A technician plan that ignores callbacks produces callbacks. We design compensation and incentive plans that reward the results the business needs, that the numbers can afford, and that the team can understand in one page. We work with your HR adviser and your lawyer on the employment side.
What you leave with
A compensation structure for every role that rewards margin, cash and quality, costs what the forecast says it costs, and fits on one page.
Who it is for
- Owners whose sales team is paid on revenue while margin falls
- Companies adding managers and unsure what to pay or how to bonus them
- Businesses with ad hoc bonuses that have become expected and expensive
What we deliver
- A review of current pay, commission and bonus arrangements against what the business actually needs
- A pay structure by role with ranges and the basis for each
- Sales compensation tied to contribution margin, collections and discount discipline
- Operations and field incentives tied to productivity and quality measures
- A management bonus plan tied to the annual budget and cash
- Plan documents in plain language, modelled in the forecast
How it runs
01Review
We read every pay arrangement and model what it has paid out against what it was meant to reward.
02Design
We set the measures, the thresholds and the payout curves for each role, tested against the last two years of data.
03Model
We run the plans through the forecast so you can see the cost at every level of performance.
04Launch
We write the plan documents, help you present them and review the first two payout cycles.
Engagement and fees
A Workshop of two to four weeks at $30K to $80K to review, design and model the plans. Employment law and contract wording are handled by your lawyer and HR adviser. Every engagement is scoped after a call and confirmed in writing. See consultations and fees.
Pay for what you want more of
Every incentive plan gets exactly the behaviour it pays for. Pay on revenue and you get revenue at any margin. Pay on jobs completed and you get jobs completed quickly, with callbacks. Pay a flat bonus at year end and you get people who expect it regardless of the year. The design question is simple: what do you want more of, and can you measure it.
For a salesperson in a company your size, the answer is usually contribution margin on collected revenue, with a discount limit. For a field lead, productivity and first-time completion. For a manager, the budget they own, with a cash or profit gate so the bonus is paid from money that exists.
Plans the business can afford
A plan designed without the forecast open is a plan that will surprise you. We model every plan at low, expected and high performance so you can see what it costs at each level and what it leaves for the business. A plan that pays well when the company does badly is the most common and most expensive mistake.
Thresholds and gates do the work. A bonus that only starts above a margin floor or a cash target protects the company in a bad year and pays generously in a good one. Payout curves can accelerate above target so that the best performers earn the most, without the plan paying out on volume that lost money.
Simple enough to drive behaviour
If a salesperson cannot calculate their own commission on a napkin, the plan is not driving anything. Each plan we design fits on one page: the measures, the thresholds, the rates, the timing and a worked example. We present it to the team with you and answer the questions, because a plan nobody understands is just a cost.
Ownership, profit sharing and equity-style plans are sometimes the right tool for key people in a company approaching a sale or a succession. We model the economics and work with your lawyer and CPA on the structure. Securities and legal matters are theirs, the numbers are ours.
- Current pay, commission and bonus arrangements for every role
- Sales, margin and collections data by salesperson for 24 months
- Productivity and quality data for field and operations roles
Industries where we run this most
Questions about this service
Should sales commissions be paid on revenue or margin?
Margin, on collected revenue, with a discount limit. Revenue-based commission pays the salesperson for discounts the company funds. Paying on collected revenue also puts the salesperson on the side of collections, which changes behaviour quickly.
How do we move an existing team to a new plan?
With notice, with a transition period and with the arithmetic shown. Model what each person would have earned under the new plan on last year's results, so nobody is surprised. Your lawyer and HR adviser confirm the employment steps. We prepare the numbers and the communication.
What about bonuses for office and admin staff?
A small company-wide profit share tied to the annual result, paid only when a profit or cash gate is met, works well for roles without an individual measure. It keeps everyone interested in the same number and it costs nothing in a bad year.
Can you help with an employee ownership or profit sharing plan?
We model the economics and show what each design does to cash, profit and the owner's position over time. The legal and tax structure is for your lawyer and CPA, and we work with them from the start.
Start with a finance review.
Ninety minutes with Ali on your cash, margin and pricing. You leave with the four numbers to watch and the two or three moves that change them, whether or not we work together.