In a previous video, I made a strong claim: sales compensation should align with profit.
And in most cases, that’s still true.
But over time—working across different companies, products, and market conditions—I’ve refined that view.
The more complete principle is this:
Sales incentives should align with the company’s true objectives—and with what the salesperson can actually control.
Most of the time, that still points to profit.
But not always.
There are five important exceptions where aligning sales compensation to profit is either suboptimal—or outright wrong.
1. Land Grab / Market Share Expansion
When you’re entering a new market, launching a new product, or competing aggressively, the goal is not efficiency—it’s adoption and scale.
In these situations:
- You want distribution
- You want usage
- You want momentum
If you tie Sales too tightly to profitability, they will naturally avoid harder-to-sell or lower-margin products—even if those are strategically critical.
In this case, it’s entirely rational to say:
“We care more about getting into the market than maximizing margin.”
2. Strategic Accounts & New Logo Acquisition
Some customers are more valuable than the deal itself.
These accounts might:
- Provide market credibility
- Become case studies
- Unlock future demand
In these situations, you’re making an investment decision, not optimizing a single transaction.
You are trading short-term margin for long-term value.
Here, it often makes sense to incentivize Sales on:
- Winning the account
- Securing the relationship
—not the profitability of the initial deal.
3. Product Validation & Learning Phase
Sometimes, you simply don’t know what’s profitable yet.
You’re still figuring out:
- Which products work
- Which segments convert
- Where margins will ultimately land
In this phase, the objective is learning velocity.
You want Sales:
- Selling actively
- Experimenting
- Generating feedback and data
If you constrain them with profitability targets too early, you slow down that learning loop.
4. Simplicity Over Precision
Profit-based compensation sounds right in theory—but can become messy in practice.
Common issues:
- Data limitations
- Timing mismatches
- Complex adjustments
- Lack of trust in the numbers
When compensation plans become too complex:
- Sales teams don’t understand them
- They don’t trust them
- Behavior gets worse, not better
In these cases, a simpler proxy—like revenue—can outperform a “perfect” but unusable profit model.
Clarity and predictability often drive better behavior than theoretical precision.
5. When Sales Doesn’t Control the Economics
This is the most overlooked case.
Imagine a salesperson responsible for securing a $1M commitment—but not for how that budget is ultimately spent.
After the deal closes:
- Product mix is determined later
- Campaign execution is handled elsewhere
- Optimization may be done by ops teams or algorithms
In this case:
- Sales influences deal size
- But not profitability
And that leads to a critical principle:
You cannot hold someone accountable for margin if they cannot influence the drivers of that margin.
The right model here is often split:
- Sales → compensated on revenue (what they control)
- Downstream teams → compensated on margin/yield
So What Should You Do?
The original principle still holds:
If you want your company to be more profitable, align incentives to profit.
But the refined version is more useful:
Align incentives to your true objectives—and to what each role actually controls.
In most cases, that leads you to profit.
But if you get the objective wrong—or apply the rule blindly—you risk designing a system that drives the wrong behavior.
A Final Warning
Be clear on what your company is optimizing for.
Many organizations oscillate between:
- Profit
- Growth
- Market entry
That kind of “whipsawing” creates confusion—and can take years to unwind.